Q: We’ve had a production bonus program here for several years, and it was nice to have that extra money each month. Last year, the owners remodeled the farrowing house and nurseries — and then they changed the bonus program. Now, we have to have better numbers to get the same amount of bonus pay. How is this fair to us?”

A: Paying a production bonus is an employee benefit; it is not an automatic that every business offers. A bonus is designed to present a challenge and a financial incentive as a reward. An effective bonus system is fair to everyone, easy to understand and promotes the operation’s key production practices.

When a business owner invests in remodeling or otherwise upgrading facilities, the expectation is that those improvements will more than pay for themselves in increased productivity and efficiency.   

Since a significant part of the production improvement comes from the financial investment in the facility, targets for each area of the operation need to be raised. That means the bonus structure will need to be modified to accommodate the higher production expectations. The owner needs to retain his fair share of the productivity increase in order to pay for the investment.

The employees benefit from the facility improvements as well because the animals should be healthier, the working conditions are better, less time is spent on repairs and fewer production problems surface. The best bonus programs are:

  • Reviewed on an annual basis.
  • Paid only to employees in good standing with the company and who are performing at a satisfactory level.
  • Paid quarterly rather than monthly.
  • Easy to understand.
  • Related directly to the production areas on which the employee has a direct impact.
  • Designed with clear, written rules for how the bonus numbers are calculated.

For more complete information on how to design and implement bonus programs, you can e-mail me at don@dontyler.com.

If you have questions for Dear Boss, send them to:

Don Tyler, P.O. Box 67, Stockwell, IN47983or e-mail to don@dontyler.com.

Your letter will remain confidential, and may or may not get an individual reply.