As long as bonus pay is discretionary by the employer, it is not considered to be a contract. If the employer promises a bonus, they may be legally liable to pay it out.
Incentive plans
Incentive plans have not typically been popular in the nonprofit sector. However, leaders are starting to see a change in perspective regarding the use of incentive plans. Providing incentive plans, especially to senior level staff, can enable organizations to compete for talent they would otherwise have not been able to pursue.
• Incentive plans are established to reward employees for improved commitment and performance and as a means of motivation
• An incentive plan is designed to supplement base pay and fringe benefits
• A financial incentive plan may offer a percentage of base salary or a cash bonus whereas a non-financial incentive plans offer benefits such as additional paid vacations or increased professional development
Communicating wage and salary information
Communication
Effective communications about compensation makes employees more aware of the value they receive from their compensation plan. When employees have a good understanding of their compensation plan they are more confident that they are being paid fairly - which results in greater motivation and retention.
A compensation communication strategy should be created in alignment with the organizations HR strategy as well as be supported by management.
The level of transparency is highly dependent on the organizations culture and varies for each organization. Ideally; employees should be advised of their own salary, their job grade / level, the position of their salary in the salary range for their job grade / level, the basis for progress through the range over time (seniority and / or performance), and the procedures for annual salary adjustments (if any).
Communicating total compensation information through formats such as statements, booklets, newsletters and memos provides a consistent message and allows employees to refer to the material later. Presenting compensation information through meetings, workshops and ongoing support allows interaction so individual questions and concerns can be addressed immediately. Overall, it is important to ensure employees have access to information regarding the compensation plan and that it is provided in clear and concise language. A compensation plan can also be used to attract prospective employees and therefore effective external communication is also important.