Blog: One-off Bonuses – the Unintended Consequences of Doing the ‘Right Thing’

Many businesses are currently considering one-off bonus payments for their lower paid employees.  A good idea in theory, but be aware of the possible unintended consequences…

Many businesses want to consider one-off bonuses for their low-paid workers.  The aim of course is to give one ‘chunky’ payment to help with the spiralling costs of living instead of a pay rise (which would add to monthly pay but would make less of an immediate difference).

Today’s announcement to cap energy bills from October will of course be very welcome, as will the first instalment of the cost-of-living payment (arriving soon for some low-income households).  The reality though is that some employers will maintain that a one-off bonus will be of most help.

Whilst this seems a practical idea – and feels like the ‘right thing’ – there are valid reasons why you should consider this approach very carefully.   As an employer there are a couple of things to bear in mind about making one-off bonuses to low paid employees:

• A bonus may have consequences for someone’s Universal Credit.  This could create unintended but significant consequences for individuals.
• You may need to come up with a ‘threshold’ below which employees would get the bonus and those above wouldn’t – or you could lay yourself open to a raft of accusations of unfairness.
• Even then you may end up paying bonuses to some who others might deem as not needing help.  For example, a staff member in a low paid role may have a spouse/partner with a very good income.

This CIPD blog expands on the problems one-off bonuses can create for certain workers and also outlines some things employers can do to help their employees through the current crisis.

In the meantime, if you’d like to discuss any aspect of pay and reward, please do get in touch.

By Jane Baalam, Pay & Reward Consultant