Real Issues. Real Answers. Smart Bonus Plans

Smart Bonus Plans

In an industry where many companies are struggling to attract and hire quality candidates, the first order of business should be making sure the existing team is productive, happy, and appreciated. While money isn’t everything, good compensation and benefits are minimum requirements for any company to offer its people. For companies who want to take it a step further, there’s nothing like a bonus check to demonstrate appreciation. But how should a company structure a bonus plan? Who should get bonuses? And when? Those questions are at the heart of this month’s real issues survey on smart bonus plans.

This month’s question came from a LBM dealer in the southeastern U.S., who wrote: “We are trying to decide if we want to change our bonus structure to a profit sharing plan where everyone on our team would have some skin in the game. Is this the best way to structure a bonus plan? What do other dealers do?” As we do each month, we built a brief survey around that core question and emailed it to the LBM Journal subscribers who have opted in to receive our email communications. A big thank you to the dealers who took time away from their work to weigh in on this issue.

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Question 1
Does your company have a bonus plan in place?

To get an idea of where LBM Journal readers’ companies are when it comes to bonuses, we asked, “Does your company have a bonus plan in place?” As the graph shows, the results vary between reader categories. The lowest percentage of companies with a bonus plan in place was lumberyards at 56.9%. Specialty dealers/distributors (ex. windows and doors, roofing and siding) were virtually tied with wholesale distributors, manufacturers and service providers (“Vendors”) at 72.2% and 73.7%, respectively.

That number doesn’t tell the whole story, however, as 36.2% of lumberyards report that while they don’t have a bonus plan in place, they do pay bonuses in good years. This is higher than the 26.3% reported by specialty dealers/ distributors and far higher than the 0% reported by vendors.

When it comes to companies who don’t pay bonuses, more than a quarter of vendors (27.8%) take the lead. A minority of lumberyards and specialty dealer/distributors do not pay any bonuses, 6.9% and 5.3%, respectively.

Chart for Question 1

Question 2
Who is included in your bonus plan?

Next, for those respondents whose companies do offer a bonus plan, we wanted to learn who is eligible. All three categories of respondents (lumberyards, specialty dealer/distributors, and vendors) agree on one thing: none offer bonuses to independent contractors. From that point of agreement, the answers diverge.

Based on our survey, lumberyards are most likely to pay bonuses to managers and executive team, at 87.5%. Specialty dealers/distributors and vendors came in at just 64.3% and 69.2%, respectively. Full-time employees were the employee set most likely to receive bonuses across the board, with 84.6% of vendors, 78.6% of specialty dealers/ distributors and 75.0% of lumberyards on board. Not surprisingly, part-time employees are the least likely to receive bonuses (25.0% of lumberyards, 21.4% of specialty dealers/distributors, and just 7.7% of vendors).

Chart for question 2

Question 3
What kind of bonuses does your company provide?

Lastly, before getting to the verbatim answers, we wanted to learn what kind of bonuses are the most prevalent. For lumberyards and specialty dealers/ distributors, the answer was clear: 68.8% of lumberyards and 71.4% of specialty dealers/distributors report paying a profit-sharing bonus, compared to just 33.3% of vendors. Among vendors, year-end bonuses are by far the most popular, coming in at 58.3%. Holiday bonuses were ranked third among all three company categories.

Between 14.3% and 18.8% of respondents’ companies pay other kinds of bonuses. Here’s a sampling:

  • Quarterly bonus on sales
  • Bonus for longevity
  • Performance
  • Bonus for hitting budget
Chart for question 3