What is a spot bonus?

It's important to reward your hard-working employees for their exceptional performance. A promotion or bump in salary isn't your only option to show appreciation. You can recognize an employee's outstanding efforts or specific accomplishments with a spot bonus. Unlike an annual bonus, you give a spot bonus "on the spot" to reward an employee for a particular action or behavior.

In this article, we'll go over some examples of spot bonuses, their benefits, and how you can offer an employee bonus program of your own.

Takeaways from this blog post:

• Employers can use spot bonuses to acknowledge specific achievements, celebrate milestones, promote teamwork, and increase productivity.
• Implementing a spot bonus program involves sparingly providing well-deserved rewards, surprising employees with rewards at irregular times, and offering meaningful rewards to maintain employee morale.
• Other types of bonuses include holiday bonuses, referral bonuses, sign-on bonuses, and retention bonuses, all aimed at recruiting and retaining top-tier talent.

What is a spot bonus?

A spot bonus is a monetary incentive employers give their employees on the spot to recognize a team’s or employee’s outstanding actions, behavior, or accomplishments. It's given to them instantly rather than at a more convenient time for the employer. Spot bonuses are generally small, giving employers a low-cost way to recognize employees and promote retention.

Why should you reward an employee with a spot bonus?

You use a spot bonus, spot reward, spot award, or spot bonus incentive to acknowledge an employee's extra effort. You can award this type of prize to an employee whose positive behavior reflects company values or for their outstanding performance on a certain task or assignment.

Here are some common reasons why employers choose to award spot bonuses:

• As a reward for meeting a specific performance goal
• To celebrate an employee's anniversary with the company
• As a reward for a job well done on a tough project
• To increase productivity in the workplace
• To promote teamwork or recognize team achievements
• To recognize employees who "live the brand"

One company that's embraced spot bonuses is PwC¹. Following the COVID-19 pandemic, PwC gave employees a spot bonus equal to one week's pay. The company did this as a "thank you" to acknowledge their hard work during the difficult transition of working from home.

The benefits of spot bonuses

When you reward employees for their exceptional performance, it makes them feel appreciated. It reminds them that hard work pays off. Since spot bonuses are instant rewards, they quickly improve employee morale and boost team performance. On top of that, happy employees tend to stay at their jobs and willingly encourage others to join their talented team.

Giving your employees special recognition for their extraordinary efforts is also good for business. Spending a little extra cash in the short term will save you money in the long run since spot bonuses are a low-cost initiative. Since employers give these out at their discretion, they can choose the appropriate reward amount. Plus, since it's a spontaneous incentive, employees don't expect it to be as much as an annual bonus.

Examples of spot bonuses

According to Indeed², spot bonus awards can range from $50 to $5,000. Employers typically spend approximately 1% of payroll on spot bonuses and award them to a quarter of eligible employees, though you can offer spot bonuses however you'd like.

Spot rewards are often monetary rewards, but you have other options to choose from.

Additional examples of spot bonuses include:

• Gift certificates or gift cards
• Personalized gifts or presents
• Additional paid time off (PTO)
• Trips or vacations for weekend getaways

Other types of bonuses to consider

You can also use other types of employee bonuses to recruit and retain top-tier talent.

A holiday bonus is given out equally to all your staff members during the "season of giving" to show your gratitude. This may sound similar to a year-end bonus, but there's a key difference between holiday bonuses and year-end bonuses. Year-end bonuses take employee performance, years of service, and base salary into account.

You can also offer a referral bonus that rewards employees who refer job candidates that the company hires. Along with referral bonuses, you can use sign-on bonuses to welcome those new workers.

Employers also use retention bonuses to recognize employees who stick around for a set period of time. Additionally, a retention bonus is meant to encourage employees to stay with their company long-term.

Implementing a spot award program

More and more businesses are using spot bonuses to increase employee engagement, employee loyalty, and employee retention. A 2022 PayScale report³ found that 79% of organizations offer some form of variable pay through employee bonus programs.

When creating a spot bonus program of your own, here are some general guidelines to follow from Indeed⁴:

• Provide rewards that are well deserved. You don't want employees to expect a reward for everything they do. Try to use spot bonuses sparingly for special occasions where employees go above and beyond.
• The element of surprise. Keep them on their toes. Reward employees with spot bonuses at irregular times.
• Provide the reward immediately. Awarding the spot bonus right away further reinforces positive behavior. It also continues to build trust with your employees by showing that you're reliable.
• Mix it up. Use your creativity and find different situations where rewarding employees with spot bonuses can serve as a useful tool.
• Be fair. Avoid favoritism and remain objective when rewarding employees.
• Choose appropriate reward amounts. It's important to offer a meaningful reward. If the value of a spot bonus seems insignificant, it could hurt employee morale rather than improve it.

Conclusion

Employers use spot bonuses to award employees for their exceptional performance and special achievements that deserve immediate, meaningful recognition. Typically, these spur-of-the-moment gifts are $50 or more. While these types of bonuses are often a monetary incentive, you could also offer a gift card or additional PTO as a spot reward.

Offering bonuses to employees "on the spot" can lead to greater engagement and productivity. As far as bonuses go, spot rewards are a cost-effective option for employers who want to boost retention and recruiting efforts.

At PeopleKeep, we're dedicated to finding the right benefits for your organization and its employees. Schedule a call with a personalized benefits advisor now!

This blog post was originally published on April 5, 2023. It was last updated on March 7, 2024.