There’s no doubt that spiralling energy costs and rising food prices will cause a number of families to struggle this winter. With employers looking to help staff during the cost of living crisis, many are considering giving discretionary bonuses as a way of providing extra money and that much-needed support. However, it’s important to understand how to introduce these properly to ensure they are granted fairly and given to those employees who need it most.
What is a discretionary bonus?
Firm-wide or company bonuses are usually contractual and tend to be paid out once specific targets are hit. This means an employer has less flexibility around how much or who is entitled to one.
On the other hand, a discretionary bonus provides much more flexibility for an employer as it provides the option of potentially granting the bonus one year, but not necessarily the next year, and setting the amount to reflect current conditions. This means it could be used to provide financial support quickly and discreetly, should the need arise.
What factors need to be considered to ensure bonuses are granted fairly?
- Knowledge of employees – The more an employer knows about their employees, the easier it is to asses who may need additional financial support. Line managers can play a key role in picking up on hints as to whether employees are facing difficult times, from dealing with unexpected boiler repairs through to marital break-ups.
- Keep information confidential – Discretion is key when it comes to knowing sensitive information about employees. Confidential conversations can be had with employees to approach sensitive subjects, as they can provide a safe space for the employee to be honest about their situation whilst not broadcasting their struggles in front of the rest of the workforce. However, it is essential that all information relating to personal circumstances is kept strictly confidential, whilst ensuring that the reasons for the decisions made are recorded and securely stored away from the wider team.
- Communication – Sending a company-wide email promoting any additional support that is available to employees, such as crisis loans, may be another way to encourage employees to come forward on their own initiative However, it is important not to rely on employees putting themselves forward. The best approach is to try and identify those suspected of struggling and approach them directly, with empathy and kindness, rather than as a manager speaking to a subordinate.
- Fairness – When considering discretionary bonuses, it’s essential to maintain fairness towards all employees. Just because a specific team may be performing well financially at work, it doesn’t mean that an individual within the team isn’t personally struggling financially.
- Bonus committee – Forming a bonus committee to utilising knowledge from across the business will help to reduce the risk of unconscious bias and utilise fairness, meaning employers can make more informed decisions when setting the discretionary bonus criteria. It is pertinent to bear in mind that these bonuses will by nature be exclusionary, and it is appropriate to be able to demonstrate the reasoning behind the decisions, should any queries about fairness arise. However, by sense checking decisions beforehand through a committee, employers will reduce the chances of unconscious bias, and ensure that help reaches every employee that needs it.
What are the alternatives to providing discretionary bonuses?
Discretionary bonuses might go a long way to help struggling employees, however, they are not the only method of assistance available. Employers may wish to consider other options available, such as providing short-term crisis loans that could then be paid back through salary deductions over a set period of time.
Another option is to explore whether any reasonable salary increases can be made. However, for businesses which are unable to provide salary increases, a one-time discretionary bonus could seem like the best way forward.
It is important for employers to seek professional advice, where necessary, to ensure that they have addressed factors such as fairness, unconscious bias and how to ensure the support will remain confidential before they go ahead and set up any discretionary bonus schemes.
As the cost of living crisis deepens, most employers want to do the right thing for their employees. With clear thinking and planning it is entirely possible to build a comprehensive programme of support as we head towards winter and the festive period.
Get In Touch
How We Can Help
From guidance on the Coronavirus Job Retention Scheme and support with largescale redundancies, to working from home and policies and other workplace issues, our team of experts are on hand to work with your HR teams to help with any issue, large or small.
Our Latest For businesses Updates
Supreme Court decision in Agnew
Guidance for employers on menopause in the workplace
Employment case law update | Autumn 2023
Employment update: news in brief | Autumn 2023
Our experts are here to answer any questions you might have
If you’d like to speak to a member of our team, please fill out the enquiry form. We will aim to reply to your query within 2 hours
Need to talk to someone sooner? You can call use at the number below