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Attracting and retaining talent is one of the great challenges facing companies. Qualified professionals have a wider range of job opportunities and end up leaving one company for another for various reasons, including financial incentives.
In the case of executives, the PLR - profit sharing is a determining factor in accepting a position. According to Michael Page, more than 60% of them expect this type of variable remuneration.
In addition to the PLR, bonuses for targets achieved also make managers' and directors' eyes light up, not to mention the enthusiasm they generate in employees, whose salaries are lower and bonuses like these make a big difference to the budget.
But what is the difference between bonuses and PLR? Can you apply both in your company?
PLR
The famous profit share is one of the most widely used ways of motivating employees and also demonstrating social concern by sharing part of the profits with those who make things happen in the company.
To implement PLR In your company, you need to set up a committee of employees and negotiate with their union. Once the amounts to be distributed have been agreed, this negotiation is recorded in the Collective Bargaining Agreement, giving workers the guarantee that they will receive the corresponding amounts.
Contrary to what many people think, not all employees receive PLR. It is linked to achievement of individual and collective goalsTherefore, if the employee doesn't meet their targets, they are not entitled to the benefit. Of course, the company needs to have a good payroll system. performance evaluation to justify not paying the PLR to a particular employee, for this reason, the majority choose to distribute the amounts to everyone, without exception.
Bonus
Like the PLR, the bonus is paid on the basis of the achieving goals. However, it is intended for managerial and executive positions, as a bonus for good management and the results brought to the company.
This type of Bonus is arbitrated by the company itself, i.e. there is no need to negotiate with employees or trade unions. What's more, it can be paid whenever the company wants, so there is no requirement for dates or deadlines.
When bonus payments become habitual, every quarter for example, they can be seen as an integral part of the executive's salary. This is detrimental to the company when a manager or executive is dismissed or voluntarily leaves the company, as this habit is incorporated into the salary and severance pay must be calculated on the total amount received.
Another negative issue when paying bonuses to any employee is the incidence of income tax, which respects the current IRS table. When it comes to PLR, the amounts are differentiated and those who receive up to 6,000 reais are exempt.
See also: 07 reasons to apply strategic remuneration
Which to choose for your company, PLR or Bonus?
The choice of Bonus depends on your company's objectives and financial possibilities. If you have a small business with only a few employees, it might be a good idea to pay bonuses, as this is a one-off bonus that doesn't require negotiation with the union.
See also: Some (good) reasons to plan variable remuneration
On the other hand, if your company's turnover is high and you have a large number of employees who need incentives, PLR could be the best solution. You only pay once a year - it can be split into two installments - and everyone is rewarded for their efforts.
There's nothing to stop a small company from implementing PLR as well, it's just more costly and makes it compulsory to pay it out every year, which isn't always feasible. If you prefer, you can implement both models and thereby attract and retain even more talent for your business, since a large proportion of companies don't have any kind of incentive like this.
Do you already offer any kind of incentive to attract and retain talent? Do you want to learn how to implement a variable remuneration system in your company? Download our e-book on strategic remuneration and put this differential into practice!
