It’s no secret that one of the biggest problems agencies can face is being able to attract and retain staff. More often than not agencies struggle to motivate and incentivise their team whilst keeping them bought into the overarching purpose of the business.
The challenge of hiring and retaining the best talent is as prominent in the Digital Creative industry as anywhere. Understandably, there are countless reasons as to why this occurs, however, I do believe that one of the key reasons is due to the fast-paced nature of the industry we operate in.
Technology and innovation are developing at such a rate that our agencies must move along with it, the people working within the agencies thrive in environments where they are expanding their skills and being rewarded for their contribution. If we cannot be seen to be keeping up, then clearly our people with be looking to move on where this seems to be happening.
Simply put you need to invest in your team for you to see the investment from the team.
The more valued, engaged and challenged they feel, the less likely they are to look anywhere else for job satisfaction.
Yes, we can do great work and work with great clients but is that enough?
How can I invest in my team?
Most agencies do not have bonus structures or schemes in place and even when they do, they are most likely not solving the issue that the scheme has been set up to solve. In some of the worse cases, the schemes set up can be very one-sided and actually be detrimental to the business.
When implementing bonus schemes, there has to be a logical approach as to why it’s being set up in the first place.
Some key questions to ask yourself;
- What’s the purpose of the scheme?
- Does it solve the problem?
- Do both the business and team win?
In essence, bonus schemes done right bring the company’s performance and the individual performances on the same path. You both get rewarded proportionately and you win together and lose together.
How to pay bonuses
Once you have established the scheme and you are happy that it satisfies both the business and individuals requirements, you now need to consider how and when it will be paid out of the business.
For example, say an individual is due to a £10,000 bonus. Typically this would get paid in one lump sum. Obviously, that will impact working capital, as the cash instantly leaves the business. So in order to reduce the strain on cash, consider deferring the bonus payments over a longer period.
Corporation tax implications
As bonuses generally are an allowable deduction for tax purposes you will get the tax relief. Normally you receive tax relief on the bonuses that have been paid during the period.
However, using the deferred bonus method you can benefit from tax relief without affecting cash. Simply declare the bonus at year end; clearly stating to whom it is payable to and when it will be paid. And as long as the bonus is paid within 9 months after the year end you will be able to accelerate the tax relief, giving you a significant tax and cashflow advantage.
The next steps
If you are thinking about setting up a bonus scheme that works for both the business and the employees in the most cash and tax advantageous way then give us a call on 0161 711 0810.