“The IPPR’s findings suggest that unfortunately the new national living wage has resulted in many businesses cutting their bonus and benefits schemes, to the detriment of their productivity. Cutting staff bonuses to save money is absolutely a false economy. Our recent research found that, for over a quarter of UK employees, a financial bonus is their main motivator. In order to boost productivity, businesses must boost employee engagement, and for this, financial incentives are clearly key.
“There is a distinction between people’s salaries and bonuses, as psychology Frederick Herzberg has argued. Salaries are a maintaining factor, that get people to work every day. Bonuses are what motivate them to be engaged and productive, ultimately increasing profitability. Consider it in terms of a race – without financial incentives, staff will walk to the finish line, maintaining the status quo. Bonuses are what encourage them to get there faster, or even find new and more effective ways of completing the distance. This isn’t about businesses throwing money at the problem at a time when budgets are tight. However, smart, performance-based rewards boost staff engagement and attainment, securing businesses’ success for the future.”