Administering Your End of Year Compensation Management Program

As we approach the end of 2020, we can look back on a year that was very different from those that came before. The unprecedented events caused by COVID-19 have forced companies and their teams to adjust; both in terms of their work practices, and in some cases, through modifications to their products. These changes have also impacted how companies are considering their people’s needs and wellness, and, in turn, how they are approaching rewards and bonuses and overall compensation management within their organizations.

How is compensation management being approached differently this year?

While 2020 has been a difficult year for all, companies recognize that their employees have stepped up to the plate and given their all, despite the many difficulties surrounding working from home, lockdowns, and general uncertainty. Many companies are, therefore, planning to use compensation rewards to acknowledge and incentivize their employees, to help raise morale, and to reward their people for their hard work and commitment.

But rather than choosing to reward all of their employees, companies are looking at each employee individually and deciding to compensate them according to their performance, based on their reaching and/or exceeding their individual KPIs. So, for example, even if a sales team has met its quarterly or yearly goals, the top performers may receive a higher bonus than others on the team who also did well, but did not exceed their individual benchmarks.

Another important differentiator about compensation in 2020, is that rewards are less formal and more spontaneous. Rather than rewarding employees once a year with end of year bonuses, companies are trending towards quarterly bonus payments. These types of bonus programs can be easily set up using a modern HRIS platform, allocating a budget for compensation, and adding any relevant collaborators such as managers to allocate the funds as they choose among their teams.

How to determine compensation management and distribute rewards

It all starts from the top with a strategic decision and budget approved by the management of each organization that can be distributed amongst managers to award their individual team members. 

It is important to get managers involved in the compensation management process. Managers should be asked for their feedback regarding which employees from their team are performing at the highest level and deserve to be rewarded most. They should be clear on why they are giving the rewards and be ready to answer questions from employees who will not receive a bonus this year.

Managers should gather together any relevant data and background regarding the performance of everyone on their team over the last year readily available - whether performance reviews or other metrics - so they can easily offer explanations as to why employees did or didn’t receive a bonus. By looking at the details of each team member’s individual performance, managers will also be ready to offer tips and actionable insights for the future.


Are there alternative ways to compensate employees?

There are many non-monetary ways to compensate employees which also strengthen the relationship between employees and their employers. Tokens of appreciation could include gift cards, restaurant vouchers, or rewards based on an employee’s specific interests, such as tickets to the latest theater show or a photography exhibition. Other ways to reward employees include extra time off, a more flexible work arrangement, or investing in their development by paying for an online course. Employees who feel that their company is interested in investing in their learning and development will feel empowered, and this will also contribute to increasing their overall job satisfaction.

Above all, employees want to feel valued and recognized for their hard work, and studies have shown that a public announcement of praise can have a very profound effect. 59% of employees say that they prefer praise or recognition, compared to just 18% of employees who prefer a monetary reward.



Compensation management is an important and timely topic for HR teams to consider as we approach the end of the year. Budgets should have already been set aside to pay for employee bonuses or other rewards, and if monetary awards are not on the table, other types of incentives should be considered to reward excellent employees. 2020 has been a difficult year all around, and therefore companies should make an extra effort to show appreciation to any employees that have gone above and beyond. This effort will pay off as it will boost morale, increase dedication, and invariably lead to even higher productivity and performance among your staff.

Ronni Zehavi, Co-Founder and CEO at Hibob. He has over 25 years of experience leading global SaaS companies. A former Entrepreneur in Residence at Bessemer Venture Partners, he co-founded and served as CEO of Cotendo, following his role as co-founder of Team8 Cybersecurity. Ronni is dedicated to enhancing company culture for fast-growing businesses.

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