To increase salaries or pay bonuses (if you already aren’t paying the latter, it’s a questions of whether to start in the first place) – that’s the question some employers face almost each year. On one hand you want to motivate your employees and reward them, on the other it’s a question of maintaining a salary level that keeps your employees happy and wanting to work for your company each month.

How to best answer the question should be as follows – is the company viable and able to pay more each month? Matter of fact is that if you’re wondering whether to increase salaries, you’ve most probably already made up your mind that you want to do that, but it’s a question of reasoning – why are you doing this? 

In case of one-off bigger profits, something that doesn’t necessarily continue in near future, pay out bonuses if you want to reward your employees. You cannot increase salaries because it will mean regularly higher expenses however, one-off bonus rewards people and does motivate them to try better in future as well. And you’d be paying the bonus out of this one-off profit.

If your company is earning higher profits regularly, you may seem to have the resources to increase salaries, but how sure you feel about this? One option, instead of increasing salaries, is to make a part of salaries dependent on the result of the company, i.e. if the company earns it’s budget gross profit, the part of the salary increases 10% or you pay out a fixed sum as an extra. The model is up to you (and your employees) to come up with and agree amongst each other. One thing to remember is that employees can be very reasonable with their expectations if explained to them.

Of course you’re free to do both simultaneously – increase salaries and pay bonuses – but if it comes down to a question of which one to do, keep in mind that it needs to be a healthy balance of keeping your company on float (you don’t want to give away all your profits) and still keeping people working for your company.