Managing staff performance

You may choose to link your staff appraisal system to decisions about pay, bonuses, and other financial incentives.

One-off bonus payments

These are based on a combination of a percentage of salary and how far the employee has achieved their objectives over the year. Be aware of the need to avoid any bias/discrimination across staff. Any rewards must be fair and consistent.

Pay increase

This could be based on overall performance rating - for example:

• below average performance - no pay increase
• average performance - 2% pay increase
• above average performance - 3% pay increase
• excellent performance - 5% pay increase

See set the right pay rates.

Shares

If you are a limited company, you may want to reward employees with shares. This means it is in their financial interest for the company to do well and the share price to rise. See further guidance on how to set up employee share schemes.

The disadvantages of financial reward programmes

Offering financial rewards can be an excellent way to motivate employees, but it can also backfire. There may be cause for dispute if employees discover some are given greater rewards than others. Rewards should be fair and consistent - make sure you do not discriminate against any employees.

At a management level, reward incentives don't always have to be financial and can be tailored to different sorts of success. Examples of non-financial rewards could include an extra day's leave, access to mentoring programmes, free or discounted parking, and discounted gym memberships.