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With a subscription, you get a newsletter with cool tips and tricks on various topics for running your business. This includes marketing, social media, leadership, and much more. You also get access to the entire Elite archive of previous newsletters and special discounts on other Successtar products.
Did we mention that as we add cool features to the Elite section of our website, you will get access to these as well, at no additional cost?
The special limited time signup price for this fantastic service is only $100 per month or discounted to $1,000 if paid annually. Click one of the links below to sign up. Because we think this knowledge is so great, we have a sample newsletter included down below for free. Read it and if you like it, then subscribe. You'll be glad you did.
Increased Wages or Bonuses?
Originally emailed on March 26, 2018
Once you form your business, hire some employees, and turn a profit, a question always hits every business owner at the end of the fiscal year. Increased wages or bonuses?
The problem
Does this sound familiar? "We've made extra money this year, my employees are excelling at performance, I like my employees, so I want to share the wealth." Now for the problem. What do you do? Increase the daily wages and salaries of your employees? Or give one-time bonuses to your employees?
Which will make your employees happier? Which is better for your employees? Which is better for your business? There are lots of factors that will go into this decision.
Increased wages
Over the decades, regular increases to hourly wages and annual salaries were pretty typical. This was meant to outpace inflation and provide an increased standard of living for people. Recently (since the mid/late 2000s housing crisis) one-time bonuses have soared in popularity.
From an employee standpoint, increased wages are beneficial because your take home pay is constantly increasing. Very rarely will companies cut wages unless there are extraordinary circumstances. And even then, people will not be happy about it.
On the other hand, for a business, increased wages can present a problem. You increase hourly wages and salaries usually when the company is doing well. Profits are soaring and cash flow is up. However, if your company falls into a slump, those guaranteed wages will start to hurt. Your fixed costs will cause a problem and you might have to fire people to maintain profitability.
One-time bonuses
Sporadic bonuses have been used over the years, but are now the most popular vehicle for distributing excess cash to employees. For example, Best Buy this year gave a $500 bonus to part-time employees and $1,000 to full-time employees.
Bonuses are attractive to employees (especially younger millennials) because it looks like a huge amount of money. If you ask most people, "would you rather have a $500 lump sum or a $0.35 increase in your hourly wage?" Many would choose the $500, in spite of the wage increase actually being a greater sum. Even a $0.20 increase would actually be better in the long run, since the increases will compound in time. That one-time bonus is not guaranteed. One year it could be $200, then $500, then $0. It is at the discretion of the board of directors. $500 buys you a new TV, $0.35 buys you almost nothing. Many people would just waste the wage increase on weekly expenses and not save it for that big purchase.
From the business standpoint, bonuses are simply cheaper. Paying out $500,000 one year out of three is better for the bottom line than paying $300,000 per year in increased wages. Hourly increases can become costly overtime, since they rarely are decreased up until the employees retires, quits, or is fired. Many companies are choosing bonuses over increased wages for these reasons.
Successtar Enterprises Recommends
Make a plan of attack for what to do with excess cash in your company. Increase the wages and benefit the employees in the long run, but put the company at risk. Or hand out bonus checks and save money while letting people make their TV, vacation, or other dream purchase.
Originally emailed on March 26, 2018
Once you form your business, hire some employees, and turn a profit, a question always hits every business owner at the end of the fiscal year. Increased wages or bonuses?
The problem
Does this sound familiar? "We've made extra money this year, my employees are excelling at performance, I like my employees, so I want to share the wealth." Now for the problem. What do you do? Increase the daily wages and salaries of your employees? Or give one-time bonuses to your employees?
Which will make your employees happier? Which is better for your employees? Which is better for your business? There are lots of factors that will go into this decision.
Increased wages
Over the decades, regular increases to hourly wages and annual salaries were pretty typical. This was meant to outpace inflation and provide an increased standard of living for people. Recently (since the mid/late 2000s housing crisis) one-time bonuses have soared in popularity.
From an employee standpoint, increased wages are beneficial because your take home pay is constantly increasing. Very rarely will companies cut wages unless there are extraordinary circumstances. And even then, people will not be happy about it.
On the other hand, for a business, increased wages can present a problem. You increase hourly wages and salaries usually when the company is doing well. Profits are soaring and cash flow is up. However, if your company falls into a slump, those guaranteed wages will start to hurt. Your fixed costs will cause a problem and you might have to fire people to maintain profitability.
One-time bonuses
Sporadic bonuses have been used over the years, but are now the most popular vehicle for distributing excess cash to employees. For example, Best Buy this year gave a $500 bonus to part-time employees and $1,000 to full-time employees.
Bonuses are attractive to employees (especially younger millennials) because it looks like a huge amount of money. If you ask most people, "would you rather have a $500 lump sum or a $0.35 increase in your hourly wage?" Many would choose the $500, in spite of the wage increase actually being a greater sum. Even a $0.20 increase would actually be better in the long run, since the increases will compound in time. That one-time bonus is not guaranteed. One year it could be $200, then $500, then $0. It is at the discretion of the board of directors. $500 buys you a new TV, $0.35 buys you almost nothing. Many people would just waste the wage increase on weekly expenses and not save it for that big purchase.
From the business standpoint, bonuses are simply cheaper. Paying out $500,000 one year out of three is better for the bottom line than paying $300,000 per year in increased wages. Hourly increases can become costly overtime, since they rarely are decreased up until the employees retires, quits, or is fired. Many companies are choosing bonuses over increased wages for these reasons.
Successtar Enterprises Recommends
Make a plan of attack for what to do with excess cash in your company. Increase the wages and benefit the employees in the long run, but put the company at risk. Or hand out bonus checks and save money while letting people make their TV, vacation, or other dream purchase.
Other Great Topics Covered in Newsletters Include
- The 3 Whats of Organizational Change
- How to Include Great Photo Content for Free
- What Can You Do with a Failing Product?
- How to Quickly Raise Cash for Your Business
- Evergreen Content is King
And many, many more excellent topics.
Photo used under Creative Commons from publicdomainphotography
