Human Resource Information Systems are a great way to distribute bonus checks to your remote employees.
Here's what you need to know:
- HRIS systems can take the hassle out of distributing bonuses
- There are several types of bonuses, including sign-on, retention, and performance-based
- The same tax rules for bonuses apply to remote and non-remote workers
If you’re like many businesses coming out of the pandemic economic shutdowns, you’re managing more remote employees than you used to. Unfortunately, this can make simple tasks like onboarding, open enrollment, and even handing out bonus packages a headache.
Remote employee bonuses, in particular, can seem tricky. After all, what counts as a bonus for remote work? And how can you send these bonuses to workers who live in other states and other countries in some cases? After all, Google offered all of their workers a $1,600 bonus regardless of location.
First, what counts as an employee bonus?
Bonuses are a form of compensation that you give to employees in addition to their set wages. Bonuses are an incentive program that you can use to increase productivity among the workforce. Monetary bonuses can be any reward you add to an employee’s compensation package, but a bonus doesn’t have to be money. Public recognition, additional PTO days, and cinema tickets are all examples of employee incentives.
Bonuses can help keep your employees motivated and increase productivity.
According to the IRS, bonuses are considered supplemental wages, which are taxable. There are two types of bonuses: discretionary bonuses and non-discretionary bonuses.
- Discretionary bonuses are bonuses that management or leadership decide to give out.
- Non-discretionary bonuses are what employers pay and they base on performance.
Both types increase the employee’s total wages, and you should double-check withholding criteria for the money you pay. In addition, non-discretionary bonuses could have further implications on nonexempt hourly workers and overtime calculations. According to the IRS, “in-kind” or non-monetary payments may be subject to federal income tax withholding, social security, Medicare, and FUTA taxes. See this IRS article for more information on taxable situations.
You can give bonuses to new hires also, as signing bonuses.
While it’s common for current employees to receive bonuses, you can also offer them to new or potential employees as a signing bonus. Due to the shortage of workers caused by the COVID-19 pandemic, many companies are now offering such rewards.
What does this mean for remote team members? Logistically speaking, the same tax rules apply whether your employee is working from home or in the office. However, what kind of business you decide on for your remote worker may change based on their location and how you plan to transfer the bonus.
The different types of bonuses
The type of bonuses and their amount vary depending on the company and reason for the reward. Generally, bonuses are part of a more extensive incentive program to retain talent and boost employee engagement.
Here are some of the most common bonuses:
- Sign-on bonus. A sign-on bonus is a non-discretionary bonus you can use to recruit qualified and talented individuals. They can be paid in a lump sum or spread over a certain time. Some are also conditional depending on the terms of the contract.
- Annual bonus. Annual bonuses are often given at the end of a successful year. Some companies guarantee annual bonuses every year, while others only give them out after reaching specific profit goals.
- Milestone bonus. A milestone bonus is a bonus that is contingent on work performance that you give to employees who reach specific goals. The company decides the bonus ahead of time so that employees have something to work towards.
- Holiday bonus. Many companies provide a bonus during the holiday season at the end of the year. This bonus is either a small percentage of the employee’s annual pay or a holiday gift that is a gift from the company to show gratitude towards their employees.
- Referral bonus. You can give referral bonuses to employees that help the company recruit qualified individuals.
- Retention bonus. Retention bonuses incentivize employees to stay with the company. They are set in advance, usually as future benefits.
If you plan your bonus strategy, 65% of employees prefer to be rewarded based on their performance, and 53% would like monthly bonuses rather than annual.
How to deliver bonuses to remote employees
The most secure and scalable way to send bonus checks to remote employees would be through a Human Resource Information System (HRIS), where payroll admins can select bonus amounts per employee and issue deposits through employees’ existing direct deposit accounts. This automatically withholds taxes appropriate for each employee type and renders the employee’s whereabouts moot.
For companies without an HRIS system or who issue paper checks, the situation can be more time-consuming.
If you are manually processing bonus checks, you’ll need to calculate the new amount after subtracting taxes, issue a new check, add the amount to the employee’s regular wages, and ship it to your employee’s address if you’re not back at the office. In addition, HR will need to coordinate the check delivery with the company announcement regarding the bonuses.
Benefits of a digital HRIS
HRIS systems can help you track and issue bonus checks easily.HRIS systems are primarily used to collect and store data on an organization’s employees. They can be run on the company’s own technical infrastructure, but they are more often cloud-based. Besides allowing companies to issue bonus checks to remote workers securely, other benefits come with adopting an HRIS system. Some of those benefits include:
- Secure record keeping. HRIS systems can easily keep track of any information related to an employee. All information remains in one place, and less time is spent locating necessary information.
- With an HRIS system, simple procedures such as approving time off or changing an employee’s marital status become more straightforward.
- Self-service options. Employees can easily manage more of their own affairs without going directly to management. This also reduces the number of time managers spend carrying out tasks. In addition, without traditional forms of storage, managers can carry out tasks more efficiently and on time.
- Meets compliance regulations. Companies must to store information in case of fraud, employee-related emergencies, and identification for tax purposes. You must store records securely and meet GDPR compliance regulations when storing such sensitive employee data.
- Tracking data. By implementing an HRIS system, human resources departments can track recruitment performances and compare and contrast that data over different periods.
- Track employee qualifications. Human resources departments can use HRIS software to track employees’ qualifications and whatever certifications and skills they may possess. HRIS software can also help with assigning training courses.
- Automated reports. With an HRIS system, you can automate reports on employee performance, turnover, and absence. This allows employers to track what areas their companies need to improve upon easily.
- Performance tracking. Using an HRIS system allows for easier monitoring of employees’ performance.
With the ongoing pandemic, it looks like remote work is here to stay. Implementing an HRIS system will allow your employees and human resources staff to quickly adapt to the changes and produce quality work without interruptions.