Employee Incentive Programs for Small Business

Date: April 30, 2020
incentive bonuses

When it comes to employee incentive programs for small businesses, many companies are starting to think outside the box. What sort of incentive bonuses will motivate employees to dedicate their best efforts to your organization, and how can these bonuses drive them to engage more in company culture?

Incentive bonuses are some of the most compelling tactics your business can use to deepen your employees’ engagement and commitment to your organization’s success. Here’s what you can do as a small business owner to offer the best possible incentive bonuses for your employees.

Employee incentive bonuses for your small business

In order to ensure employee retention and satisfaction, it’s crucial for any small business to offer a performance based incentive plan. This lets employees know that their work within your company is valued, and that if they put in the effort it takes to go above and beyond their job expectations, they will reap the benefits.

Having an employee bonus plan will serve to outline exactly what employees are compensated for, and when. For example, many employees may receive incentive bonuses when they hit milestones within their company (e.g. after 6 months, 1 year, etc.), or if they complete additional targets. 

There are many types of incentive bonuses and bonus plans that can increase your employees’ engagement with your organization. Depending on your company’s existing infrastructure, you may wish to offer one specific employee bonus, or a combination of several company wide.

7 types of employee bonuses and incentives for your small business

If you're looking to explore new ways of rewarding employees, you may want to consider the various types of bonuses and incentive programs you can offer. Some of these incentives for both individuals or teams may include:

  • • Incentive compensation
  • • Annual incentives
  • • Referral bonuses
  • • Sales commissions, or variable pay
  • • Holiday bonuses
  • • Hiring bonuses
  • • Profit sharing plans

Incentive compensation

If an employee achieves their performance objectives, they may be entitled to receiving incentive compensation in addition to their existing base salary. This amount payable is usually outlined in an employee’s contract at the beginning of their employment.

Typically, 65% of employees prefer incentive bonuses that have a direct correlation to performance, as it typically helps them gauge what is expected of them. Performance tracking can therefore help both you and your high performer employees know what incentive compensation program may be applicable to them.

Annual incentives

If you’re looking to increase employee retention and reward employees, offering annual incentives is an excellent method of ensuring that employees stick with your company long term. These incentives can encompass an employee bonus plan that is agreed upon at the beginning of their contract, or be based on employee performance leading up to their anniversary in your company.

Referral bonuses

Attracting and retaining good employees can be challenging - therefore, rewarding employees who refer new hires is a highly feasible option for recruiting the right people. Offering compensation for a new hire is not only a way of finding exceptional new employees - it can also help with employee retention.

Variable pay

When a sales employee meets or exceeds their goals, a sales commission (or variable pay) can be offered as a performance reward. This form of compensation is usually paid out as a percentage of sales volume, as is agreed between the employee and business owner when they are hired.

Holiday bonuses

During the holiday season, many small business owners may choose to offer a holiday bonus as a “thank you” for their employees’ hard work during the calendar year (approximately 52% of businesses offered holiday bonuses in 2014). The additional amount awarded is typically based on a small percentage of the employee’s overall salary, or the amount the employee would typically receive within a two week period.

Hiring bonuses

As an added perk for joining a company, small business owners may offer an additional bonus for being part of the team. This motivates valuable new hires to choose their company above others that may be vying for their engagement.

Profit sharing plan

Typically most popular amongst small to medium-sized businesses, a profit sharing plan will give employees compensation that is equivalent to, or around a percentage of a company’s quarterly or annual profits. These profits are often tied into the company’s annual revenue, and can be distributed as contributions to an existing plan (e.g. a retirement plan) or as a cash stipend.

Additional incentives for employees

Although financial compensation is often the most attractive for many employees, other non-monetary forms of incentive bonuses can elevate your employees’ level of satisfaction and engagement. These incentives, or “perks” are often offered as an additional method of demonstrating employee appreciation, and may include:

  • • Snacks, coffee, or tea made readily available
  • • Team lunches
  • • Team building activities (e.g. outdoor activities, in-office massage or yoga sessions, etc.)
  • • Benefits plan (e.g. medical, dental, physiotherapy, etc.)
  • • Work from home days

Often, employees enjoy rewards that go above and beyond financial compensation. By showing that you care about employee well-being on a continual basis, you are ensuring higher levels of productivity, commitment, and fulfillment.


As a small business owner, it’s crucial to offer a variety of incentive bonuses and plans for your employees. Happier employees are typically better dedicated to the goals of their organization, allowing you to maintain your company's bottom line while retaining the employee base that contributes to your company’s growth.

However, your incentive bonuses can go far beyond financial compensation: in order to offer the best possible incentives to employees, new and innovative tools are being used to discover the rewards that employees want to see within their organization, and how they want them applied. If you’re looking to stay ahead of the curve and apply leading-edge rewards to your employee base, contact Bucketlist today.

Go to Top