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The impact of bonus and variable pay on morale and engagement





Posted by Mark Macoun on 06 July 2020

The impact of bonus and variable pay on morale and engagement

Bonus | Motivation | Employee engagement | Engagement | Covid-19

2020 has been a year of uncertainty, and all of us have had to adjust to varying degrees of change to our working lives. For some, business has all but ground to a halt, meaning difficult decisions have been required to secure the future of the organisation; for others, they are busier than they had anticipated they would be and have been left unprepared.

Within the current COVID-19 landscape, bonuses are questionable, and it is safe to assume that current employee expectations over variable pay is low this year. This is particularly true of businesses where vast swathes of individuals in roles which would have traditionally been heavily financially incentivised, such as sales roles, have found themselves either furloughed or redeployed, making it impossible for them to hit the targets required to achieve their bonus.

However, in contrast, some industries are providing unexpected bonuses for workers. For example, supermarkets such as Tesco, Sainsbury’s, Co-Op, Asda, M&S and Morrisons have provided workers with a bonus on the usual hourly rate through out most of March to the end of May by way of recognition of the extra effort made by those working through these time, as well as the increased risk they were exposing themselves to in the midst of a global pandemic.

Whilst gestures such as this are much appreciated by workers, it is imperative that it is implemented correctly, and rules are clear and fair, or it can do more harm than good. Whilst Sainsbury’s, Co-Op, Asda, M&S and Morrisons all included full-time, part-time workers and temporary workers in this new bonus scheme, Tesco only included full-time workers that had been with the business prior to COVID. By excluding temporary and part-time workers, they created a sense of disparity and unfairness within employee groups, meaning the scheme had the opposite effect to what was intended.

Most companies that do not work in key sectors or employ predominantly key workers have taken a huge financial hit during lockdown and are therefore in a lesser position to offer a bonus to workers. For many, it is impossible to justify – or indeed, find the finances for – bonus payments when the organisation is operating a reduced workforce, missing financial targets due to reduced trading, and potentially making redundancies. Equally, many in roles which have an element of variable pay are finding it impossible to hit their targets – how can, for example, sales-based employees achieve their commission without any client interaction.

As we are now seeing lockdown lifting, albeit gradually, many workplaces are getting back to some kind of normality, are bonus expectations set to come back? For some companies, probably not. Business as usual is not expected to be in full swing until 2021, meaning workforces are not likely to be at full capacity and budgets are going to be tight for at least the rest of the year. So for organisations who have depended predominately on bonuses and variable pay to motivate and engage workers, now is a good time to expand your reward and recognition scheme. Here are a few ideas:

1.    Show you care via recognition – a simple thank you goes a long way
2.    Provide non-monetary benefits, such as extra holiday days, discounts, or vouchers
3.    Improve your internal communications strategy to ensure a sense of unity and togetherness 
4.    Compensate on base pay through year-end performance reviews if budget allows
5.    Extend remote working arrangements for those who are benefitting from the savings they are making through reduced travel costs.

If you need further advice or assistance with structuring your bonus schemes, please contact us, as this is an area where our expertise can add real value. You can call us on +44 (0)20 3457 0894 or email

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