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Workplace bonuses are nothing new. U.S. employers have been dishing out cash-based holiday bonuses (instead of the traditional candy, gold coins, or turkey) since the beginning of the 20th century. In 1902, JP Morgan & Company made quite a statement by giving each of its workers the equivalent of their annual salary as a Christmas bonus. Within a few years, cash-based annual bonuses were the norm for companies throughout the country.
Fast-forward 120+ years, and modern employers use a variety of employee bonuses to reward their staff. In fact, 37% of companies now use some form of spot bonus incentive or other discretionary bonus programs. This guide takes a closer look at how spot bonus programs work and why employers should use them.
A spot bonus is a monetary or non-monetary reward paid on the spot to acknowledge an employee’s positive contributions or behavior at work. Performance-related incentives are usually paid out as some form of annual bonus, but employees can receive spot bonuses at any time of year. Their spontaneity carries an element of surprise that can boost a worker’s mood and establish the company as an employer of choice.
Spot bonuses are not the only types of bonuses that organizations can use to incentivize their employees. However, they differ from the following types of bonuses as they don’t have any predetermined criteria:
Spot bonuses don’t have a schedule, but they often have a framework that guides managers on when and why to extend them to hardworking employees. Some companies will design their spot bonus program around giving small bonuses frequently; others prefer to give large, more meaningful bonuses occasionally.
Wherever you sit on the spot bonus spectrum, here are some scenarios where a spot bonus might be a fitting reward:
Marketing manager Maria was set a challenging target to increase the brand’s social media engagement by 25% over three months—a target which she beat by 10%. As the company received significant growth in brand awareness and customer engagement, Maria’s manager awarded her a $2,500 spot bonus.
Albert had been a loyal and hardworking member of the IT department for a decade. Over the years, he consistently went above and beyond his job responsibilities, contributing to several successful system upgrades and mentoring new employees. To celebrate his 10-year work anniversary and his exceptional contributions, the company surprised Albert with a $5,000 spot bonus and a weekend getaway package for him and his family. Unsurprisingly, Albert now feels even more loyal to his employer.
Remember: Spot bonuses must always be fair. If you have other employees approaching long-service milestones, be sure to honor them equally.
Roger, a senior software developer, noticed that a new team member, Sarah, was struggling to adapt to the company’s coding standards and processes. Roger took the initiative to provide her with one-on-one mentoring, which significantly improved her skills and confidence. Thanks to Roger’s support, Sarah quickly became a productive member of the team. Recognizing Roger’s proactive assistance and dedication to team success, the management awarded him a $500 spot bonus.
Project manager Lisa led a high-stakes product management project with a tight deadline and numerous obstacles. Despite the obstacles, Lisa successfully coordinated her team, managed resources efficiently, and delivered the project on time, impressing both the clients and senior management. To acknowledge her exceptional leadership and problem-solving skills, Lisa received a $3,000 spot bonus.
Customer service rep Valerie consistently goes above and beyond to embody the company’s core values in her interactions with customers, always handling customer complaints with grace and professionalism. In recognition of Valerie’s dedication to living the brand’s values, she’s awarded a $1,000 spot bonus to reinforce the importance of offering an exceptional customer experience.
Companies already budgeting for regular compensation and variable pay may be wondering how much to set aside for spot bonuses. There are no set rules here; it comes down entirely to your organization’s financial position and how much you wish to invest in spot bonuses as retention and engagement strategies.
Anecdotal evidence from Akash Mukherjee, Former Tech Lead at Google, reports that the search engine giant offered the following as spot bonuses:
“They ranged between $500 to $100k, but I’m sure the higher limit is very rare, and most of them are generally in the range of $2k to $10k.”
For companies unable to offer the same as Google, historical data from the 2016 SHRM and Globoforce’s Employee Recognition Survey reports that companies tend to invest around 1% of their payroll costs on value-based rewards like spot bonuses.
To design an effective spot bonus budget for your program, consider the following:
Employers can recognize their employees in numerous ways, including employee of the month awards, kudos walls, and tagging them on internal Slack channels. So, what makes spot bonuses worthy of your time and effort?
With 65% of employees potentially or actively looking for a new role this year, employers must find new ways to retain existing employees. Spot bonuses can boost employee morale by ensuring everyone feels appreciated, valued, and loyal to the company.
Unlike performance-related bonuses, which typically happen at the end of the year, spot bonuses allow employers to reward employees in real-time. This practice creates an excellent association between the positive behavior the employee has demonstrated, and the reward they receive. And it makes them want to repeat the positive action in the future.
People Strategy Expert Anne Caron believes strongly in the power of managers delivering spot bonuses as soon as they observe exceptional performance:
“Bonuses should NOT be annual. They should be given on the spot. Most annual bonuses reward employees for doing their work and completing their objectives. So my question is: What is the salary for? Just for showing up at work? No! The objective of the bonus should be to recognize exceptional performance (above and beyond what is expected in their job and what is already covered by the salary.)”
The beauty of spot bonuses is employees don’t expect them, as Hemant Pandey, Senior SWE at Meta, remembers:
“I once got a spot bonus of $4,000 at my old employer. I never asked for it and got it for one of my contributions, which I thought was part of my job.”
Unlike performance bonuses, which are often diarized as occurring after a performance review, spot bonuses are much harder to anticipate. This resulting surprise triggers a ton of neurological and emotional responses in the brain’s amygdala that create a feeling of gratitude and positivity.
Employers seeking an uptick in employee engagement, productivity, morale, and overall employee sentiment can achieve a quick turnaround from spot bonuses. Unlike waiting until the end of the year to reward your workers, spot bonuses provide instant gratification for the employee and immediate results for the employer.
Spot bonuses are often monetary, but other options may better suit your company culture. Consider offering the following as part of your rewards and recognition program:
The key is to personalize the bonus so it’s meaningful to the recipient. If you’re unsure how to do this, or it’s too much hard work, give your employees the opportunity to select a reward that makes the most sense to them.
Be sure to follow these quick best practices when incorporating spot bonus programs into your benefits package:
Benepass makes it easy to slip a spot bonus into your existing employee benefits scheme by giving program administrators the option to add one-off perks without jumping through any extra hoops. Here’s how it works:
Ready to learn more about incorporating spot bonuses in your benefits package? Book a free Benepass demo today or contact sales@getbenepass.com to learn more.
