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The SME Guide To Increases And Bonuses

The SME Guide To Increases And Bonuses

We’ve entered Q3, which means it’s time to start thinking about your employee expectations for the close of the year as well as the year ahead.

SMEs currently employ 30% of the country’s workforce. The National Development Plan (NDP) expects this number to rise to 90% by 2030. Unfortunately, this growing sector faces more challenges than it’s larger counterparts, such as late payments, access to funding, support and high failure rates.

At this time of the year, your staff will be looking to you for extra support for the upcoming sill season and will want to know if their salaries will be increased to meet inflation. As a business owner, you want to be able to look after your staff, but when maintaining steady cash flow is a constant challenge, it can be difficult to achieve.

Here’s some advice on how to navigate the tricky waters of bonuses and annual increases.


Back in the day, a thirteenth cheque was a given. In the current climate of slow economic growth, recession and high SME failure rates, they’re essentially a fairy tale. Performance bonuses are more common, but again, these are awarded at the business’s discretion, and not by right.

Thanks to a huge contract, you may have experienced a profitable trading year and been able to reward your staff accordingly, but good business months are never a guarantee. You might not be able to give out bonuses a second time.

Be open with your employees from the beginning that bonuses are not guaranteed and ensure that your employment contracts echo this.

There’s nothing more rewarding than being able to give a hard-working employee something a little extra, but it shouldn’t be an expectation, especially not at the expense of your business.

Reward your staff in other ways

By definition, being a good employer doesn’t necessarily equate to being financially generous. It would be nice, especially for your employees, but the trading landscape for small businesses is too unpredictable for that to work long-term.

That said, rewarding and recognising hard-working staff is vitally important. If you fail to do so, you’re opening up your business to low morale, grievances and a high churn rate.

There are many other ways you can reward staff. In terms of benefits, you can contribute towards their medical aid scheme, pay for a retirement annuity or even offer staff shares in the company. You can also increase their leave days or introduce flexible working hours.

Live your company vision and values in the office. Creating a great company culture can be hugely beneficial as staff will feel more fulfilled at work and enjoy a better work-life balance. Treat your staff like family and they will feel like they’re contributing to the greater success of the business.

At the end of the year, splash out on a fantastic staff function and use the opportunity to publicly recognise your most-valued team members for a job well done.

You may not be able to afford to pay them a thirteenth cheque, but a bunch of flowers and an Employee of The Year certificate will be greatly appreciated.

Salary increases

For smaller businesses, this is a tricky topic. In many cases, staff salaries are a major expense, if not the main one. It is also the one expense that can’t be missed, re-negotiated or delayed.

Most employees will expect an annual salary increase. Families need to be provided for, after all. But increasing salaries on an annual basis means increasing your business expenses, which can seem like a giant boulder perched on a very thin ledge.

South African labour law doesn’t currently regulate salary increases. That’s why it’s vitally important for you to cover your business’s policy regarding increases in your employment contracts.

If the nature of your business means you can’t guarantee an annual increase then you should specifically state that these are discretionary and based on good company performance.

This doesn’t mean you’re off the hook when it comes to salary increases. If your business is doing well, it’s in the best interest of both your business and your employees to adjust accordingly.

Be as open as possible when it comes to the health of your business. Chances are if your employees understand the business is experiencing a bad trading period, they will do everything they can to get the business back on its feet.

Do you have any advice for other SMEs on this topic? Join our Facebook and Twitter communities and leave us a comment.

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