Transparency in bonus calculation is far more than a “nice-to-have.” It strengthens trust, aligns performance with organizational goals, fosters fairness, and enhances engagement and retention. It protects the company legally and ethically while also driving higher productivity and employee satisfaction.
Transparency in calculating employee bonuses is crucial for several reasons:
- Builds trust and credibility: When employees understand how bonuses are calculated, it reduces suspicion of favoritism or unfair treatment, strengthening trust between employees and management.
- Motivates performance: Employee motivation increases when they see a direct link between their performance and the rewards they receive.
- Supports retention and engagement: When employees perceive the bonus system as fair and understandable, they are more likely to stay with the company and remain engaged.
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Facilitates continuous improvement: Through goals, areas for improvement can be identified and their performance adjusted to maximize bonuses, which benefits both the employee and the organization.
How to configure a bonus calculation
Bonuses are calculated on Nailted through company goal cycles, so the first step would be to create a goal cycle. See here how to create it step by step.
Once the cycle is created, it is time to define the cycle evaluation schema following the steps described below:
- Go to your Performance section and click on the Goals section.
- Select the Cycles tab and find the goal cycle that you have created earlier.
- Next, click on the Three dots icon that appears next to it and select Evaluation schema.
- Decide if you want the evaluation schema to be public or private. If you enable the Evaluation schema: public option, employees will see how they will be evaluated in this cycle.
- Next, define the weight that individual goals will have against the corporate goals.
💡This weight can be modified later on if required.
- Select using the drop down menu next to Corporate goals, all the goals that are classified as corporate goals for the calculation of the bonus.
💡You can choose as many as required and they will be applied as corporate goals for all the people involved into the goal cycle.
- If you plan to evaluate goals in a later stage to calculate the bonus, you can set up now the weight that the Performance review and the goals accomplishment will have. This step is optional at this moment.
- Finally, click on the Save button to save your changes.
From this moment, all the goals that will be added into the cycle will take into account the configured evaluation schema and will provide information about the bonus completion of each individual.
What information would an employee see?
If you decide to make public your evaluation schema, each person within the company who has goals assigned to them will be able to see the following information:
- Percentage of their bonus attached to Corporate goals: The progress of corporate goals are displayed in this section.
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Percentage of their bonus attached to personal development: This section displays the percentage of completion of the goals that have been assigned to a person, they being divided into:
- Personal goals: This is the weight of personal goals that have been directly assigned to you.
- Performance evaluation: This is the weight that your performance review will have over the calculation of the percentage of the individual bonus attached to personal development.
- General progress percentage: This section displays the total general progress towards achieving the bonus.