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The importance of guidelines for bonus payments

Guidelines for employee bonus payments establish clear and fair criteria for determining when and how bonuses are awarded to the team. These guidelines help align employee performance with company objectives, company values, motivate the team and provide transparency. Guidelines ensure that bonuses are distributed equitably based on predetermined factors such as individual or team achievements, company profits or other measurable goals to avoid the risk of discrimination claims.

The bonus guidelines may include the following items, depending on your business:

• Clearly defined objectives and purpose within the company
• Specifically outline the eligibility criteria
• Clearly outline performance metrics or criteria that will be used to determine bonus eligibility
• Bonus structure calculations
• Limits on maximum or minimum amounts the employee may receive
• Transparency in the process
• How the bonuses will be communicated
• Clear terms and conditions which may include: Clawback provisions, the impact of unpaid leave, poor performance, probationary period and end of employment
• State that the guidelines will be reviewed periodically to align with business goals and subject to change
• Seek a signature from employees to ensure they have read and understood the document

We are here to help and support our clients with creating guidelines for bonus payments that are clear, fair and align with the company values and goals. For more information on how we can help create compliant guidelines that work for your business, call us on 1300 474 672, or send us an email.