After paying bonuses for almost 5 years now, I recently realized I had never written things down internally. So I did that in our intranet the other day, but since I keep explaining the system to applicants in the salary negotiation phase all the time, I thought I might as well share it publicly.. 🙂
The first rule of how our bonuses work is that there is no “official” bonus system. We don’t offer bonus based on personal performance because that’s just a recipe for disaster. Bonus payment also doesn’t depend on “hard facts of how the company is doing”, there is no formula that determines payments. In fact, nobody here at SI should expect any bonus to be paid at any time, because there’s no guarantee that we’ll pay it.
But: If the company as a whole is doing well, then I think we all deserve to be proud of it and should get a share. So that’s why twice a year – in January and July – I take stock, look at our revenues in comparison to expenses, how the competition is doing and how we’re doing, and if the situation looks reasonably good, then everyone gets 10% extra based on the previous 6 months’ salary.
Everyone needs to sign a paper that they understand that this bonus is not something to rely on. Because you can’t. If the company’s overall financial stability is at stake, then removing (or reducing) the bonus payments can help stabilize the system until we have found a solution. Salaries are our biggest expense by far, and saving 10% can mean a lot. (Keep in mind that in Germany salaries can’t go down for worker protection reasons.)
Obviously, extra money twice a year is a great thing, and I guess everyone would get a bit nervous or demotivated if we suddenly can’t pay bonuses anymore. So yes, as long as possible we’ll pay the bonuses. In case of crisis, we’d first try to reduce other expenses, and of course we can also lean on the bank account buffer. Only if all that doesn’t help, then we might decide that a bonus can only be 5% or even that it needs to get cut entirely until we find other measures to balance the company again.
The best way to ensure bonuses keep flowing is for everyone here at SI to keep doing their best, and always think about how to help our customers in impactful ways. It’s a team effort to improve Small Improvements, and everyone can do their share. All the little improvements and initiatives do add up, and raise our ability of paying bonuses for the next 5 years too.