Bonus Pool

The bonuses are based on the performance of the company and the individual contribution of employees to the company results. The companies does not have the issue to measure the overall performance of the organization, but the fair performance evaluation of the individual employee is a real issue. The company cannot make the bonuses fully dependent on the individual performance as it is extremely risky for the costs of the organization. The company usually introduces the bonus pool for the individual bonus calculations.

The organizations have no control over the managers and their individual judgements about the performance of their employees. The managers have to be managed by the allocated budgets for the bonuses as the company has to keep the total bonus budget on the company level.

The company cannot set detailed rules for the evaluation of employee KPIs as it has no power to check the evaluations. The time is very limited and the managers know it. The HR has no power to become a part of the evaluation discussions and the organization tries to calibrate the results.

The bonus pool is the highest potential bonus budget on the organization level and when the individual bonuses are higher than the bonus pool, the bonuses are proportionally recalculated to meet the budget. It is the most efficient bonus tool, but it makes bonuses messy for the employees, as they would need to know the bonuses of other employees to calculate their own bonus.

The bonus pool is very efficient and it is not hard for HR to calculate the individual bonuses, but the employees can be de-motivated by such a tool.