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<i>Dear Workforce</i> How Should We Divvy Up a $10,000 Project Bonus

July 8, 2005
Dear Math:

From your description, it sounds like you are planning to implement an ad hoc team award, which can be a great way to recognize the contributions of a team. Ad hoc recognition programs provide high motivational value, since the bonus generally comes as a pleasant surprise after the team's work is complete.
When you present a team bonus award, it is important to remember a couple of key points:
First, bonus plans have a way of becoming expected. You don't want bonuses to be viewed as an entitlement each time you establish a project team. To avoid this, award special bonuses selectively and only for outstanding team performance.
Second, pay attention to how you distribute awards, so that team members know you are being fair. To determine the individual portions of the award, you could:
Pay an equal share to each team member. Since your team has 10 members, each member would get 10 percent of the total bonus amount. This method assumes that everyone contributed equally to the success of the project.
Use base pay to establish the proportionate distribution. For example, with a base pay that is 14 percent of the team's total base pay, your project manager would receive $1,400 of the $10,000.
Use job level to determine relative shares in the bonus. Using this approach, you would pay the highest amount to the director and the lowest amount to administrative support.
Determine a percentage for each team member based on the relative value of their contributions. For example, you might divide the total bonus amount with 20 percent for the project manager, 15 percent for each of the engineers, 10 percent for the director, and 5 percent for each of the other team members. The assumption here is that while everyone contributed substantially to the effort, senior members of the team should be recognized for their leadership direction, and engineers deserve recognition for their technical contribution.
Share the bonus on the basis of time and effort committed to the project. Even though the director and project manager both contributed to the team effort, it may have required a full-time commitment from the project manager but only 10 percent of the director's time. The project may have demanded a 10 percent commitment from administrative support but a 50 percent commitment from the engineers. Figure out the relative time commitments and then divide the bonus amount proportionately.
Whatever you do, choose a method that is perceived as equitable and consistent with your company culture. And take the opportunity to award the bonus in public, so the team can bask in the glory of its accomplishment. Use the event as a way to communicate the company's appreciation for extra effort on the part of project teams. You also could use the occasion to enhance employee understanding of your pay and performance philosophy.
SOURCE: Bob Fulton, managing director, and Patsy Svare, managing director,The Chatfield Group, Glenview, Illinois, September 2, 2004.
LEARN MORE: Basic Principles for Implementing Team Compensation.
The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
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