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Arguably one of the biggest challenges facing many manufacturers is the shortage of qualified, highly-skilled employees.

With a shortage already building, a recent report published by the Government office for Science forecast that there will be thousands of jobs to fill in the years up to 2020 as people retire or leave manufacturing. Many manufacturers are combating the looming skills shortage through increased training opportunities and apprenticeships, and making promising progress. However, it is essential manufacturing business owners also do their upmost to retain, encourage and support key employees already employed within their business. In this article, we look at why employee bonus schemes are widely used across the sector and how they could help retention.

Employee bonus schemes – a way to retain key employees?

Productivity and output bonus schemes: Productivity and output bonus schemes are frequently used in manufacturing. For example, ‘piece work’ – a scheme where employees are paid according to the number of pieces or units they produce. In these types of bonus schemes the benefits may extend beyond employee satisfaction and lead, potentially, to good productivity and good customer service.

Quality bonus schemes: Quality bonus schemes are also frequently used within in the manufacturing sector. One of the key reasons for this is that it is much easier to measure ‘quality’ e.g. using the number of defects found in a specific period of time.

Employee share incentives: There are also a number of share incentives that you may wish to use. The use of employee share schemes and share based payments can be a cost effective and tax efficient form of remuneration, particularly for senior management.

Important considerations

Although employee bonus schemes and share incentives can help to foster strong working relationships, in regards to retaining and incentivising staff, it is also important to also consider the potential disadvantages that they may have on your business. For example, over time employees may come to expect a bonus, seeing it as the norm rather than as an incentive. There are also possible consequences if the scheme fails to achieve the changes or actions it was intended or if the scheme is too onerous to implement.

It is therefore crucial that any employee bonus scheme is carefully considered, with a forward-thinking approach. It is advised that you seek advice from specialist manufacturing accountants on the suitability, implementation and any possible tax implications of employee bonus schemes as soon as possible.

More from our manufacturing experts

You can find all of our latest manufacturing sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Stephen Charles is a tax partner at the firm, specialising in corporate and business taxation. For more details and advice, please contact Stephen on [email protected] or 0114 266 7141.

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