Because of staff shortages, employers are pulling out all the stops to recruit and retain staff. Not infrequently, these are financial measures. What can employers offer if they want to avoid a regular salary increase? Employers have the choice of various financial ‘incentives’. Well known are the 13th month and year-end bonus, but there are also other possibilities that are less applied. Three alternatives are listed below.
Labor market allowance
Employers can pay employees who perform a function for which there are relatively few employees available on the labor market a temporary labor market supplement on top of their salary. Several collective bargaining agreements include provisions on the labor market supplement. If an employer is not bound by a collective bargaining agreement or the collective bargaining agreement offers scope, he can also draw up his own rules for this. There are no statutory rules regarding the amount and duration of the supplement.
Employers can also reward employees with share option rights. These give employees the right to buy a predetermined number of shares at a predetermined price at a predetermined time. Because employees share in the profits and get a say in the organization, stock options have the advantage of increasing employee engagement and motivating employees (extra) to contribute to the organization’s growth. This way of rewarding is especially popular with scale-ups and start-ups – for which the government wants to make the scheme more attractive – because they often do not yet have the financial means to be competitive in terms of salary. But employers can also offer this as an “extra” to attract or retain employees. The moment the employee exercises his option right, he will have to pay payroll tax on the difference between the exercise price and the fair market value of the shares.
Profit or loss sharing
A co-breathing form of compensation, such as profit or result sharing, gives employers more flexibility in payroll. If the set goals are not achieved or no profit is made, the employer is also not bound to pay out the “bonuses. A result sharing is a collective variable pay scheme. For each goal that the organization achieves, employees receive – usually at the end of the calendar year – a predetermined payment. That benefit is a one-time payment, in the sense that employees must earn the benefit again each year. A good result-sharing scheme involves all employees: not only employees, but also freelancers and temporary workers. Result sharing is broader than profit sharing, which only looks at the financial result of the organization.
Want to have a talk on how to implement this within your current benefit and compensation system? Do not hesitate to give us a call!