Bonuses are a very subtle object when it comes to performance management. And it is very strange to see that because as the name suggests, they are basically …. “bonus”. So if your employer gives it to you, thank you and take it and if they do not, employees should not grumble too much.
You see, we, as employees get paid by sacrificing our human labor and time in return for a salary. So you do 40 hours a week and multiply this by 4 and they give you your monthly salary at the end of the month. Fair. If your employers refuse to pay you for this, you can rightfully get angry and feel unjustified.
Bonuses are a totally different thing. These days, they are being almost packaged as a whole remuneration but they are meant to be discretionary. Employees are much happier when they receive their bonuses because it feels like you do not have to work for it but yet are rewarded pretty nicely – which is almost like the case for dividend we will see later.
As an employee, there are 3 types of bonuses that I am currently getting.
1.) Annual Wage Supplement (AWS)
This is also known as the 13th month salary.
For AWS, employees generally receive the same amount as their last drawn salaries, regardless of position, tenure or performance rating. This type of bonus really has no effect on performance because it’s the type of bonus which is customary at the same time every year at almost all companies we have here. Employees tend to expect it and there’s no reason to work harder or smarter or put in extra hours to get it.
In fact, there are people who argue that this isn’t considered a bonus. It is rightfully theirs to begin with.
For instance, February is usually the only month that you get paid “correctly” as they had a full blown 4 weeks to that month. In other months, there are usually 30 or 31 days depending on the type of months. So employees argue that they are being underpaid in other months. If we add those days up throughout the year, then we will get 29 days as being “underpaid” using this theory.
Jan – 3 days
Mar – 3 days
Apr – 2 days
May – 3 days
Jun – 2 days
Jul – 3 days
Aug – 3 days
Sep – 2 days
Oct – 3 days
Nov – 2 days
Dec – 3 days
Total = 29 days
2.) Performance Bonus
The second type is the discretionary performance bonus which usually links the two matrix together – company’s performance and individual performance.
Usually, people will get very excited when the company’s announces their performance bonus matrix to the staff. As these incentives are strongly tied up to how much the employees alone and as a whole contributes to the bottomline of the company, they really want to see strong figures coming out from this.
Again, another expectations that can come down really bad especially that it’s difficult to control both the two matrices.
3.) Dividend Bonus
This is my favorite type of “bonus” amongst all the three mentioned above.
As a business owner having an equity stake in the company, I do receive these dividend income regularly as part of their quarterly or half-yearly distribution out of their earnings to reward shareholders. Instead of having my own limited time and effort working hard to achieve the above performance bonus we talked about, this is having other people time and effort working hard for your business so that you will be rewarded as a business owner. In other words, you have money working hard for you, not the other way round.
I currently draw around $17,000 per annum for my dividend bonuses from my portfolio and this translates directly to around 2.8 months of my current salary. The best thing to this is it gives me almost consistently increasing payout every year, even if I do not add anymore capital to it or better still even if I had completely stopped from working full-time.
So there it is – 3 types of bonuses for me and perhaps there might be more for other people. But take a look closely and decide for yourself which one that will give you sustainable payout throughout your life.
Do you really want, for the rest of your life, attempting to justify your employers the bonuses that you deserved to get for the hard physical 9-6 work that you put in every single day or would you rather have these bonuses coming in even while you are enjoying your holidays on the other island of the Caribbean.