The recruitment and retention of good quality staff is fundamental to the success of any practice and independent firms have long bemoaned the fact that they find it hard to compete with the major players when it comes to salary levels. However, the more progressive have now looked beyond the wage packet and are creating remuneration packages that, as well as making them much more attractive, offer a significant contribution to efficiency and profitability.

Central to this is a bonus scheme that keeps everyone focused on the job in hand and also offers a real incentive for staff to ‘go the extra mile’. For most, this means a profit sharing arrangement where everyone gets a share depending on their contribution.

Some firms simply take the overall profit figure and distribute an agreed percentage to everyone with the amount dependent on position and seniority. Others divide it on a departmental basis so everyone’s bonus is dependent on the profits made within their department. This has the added advantage of encouraging teamwork within departments.

Whichever model is selected, it is important that the mechanics are discussed and agreed beforehand, otherwise there is a danger of resentment or dissatisfaction from people who feel they have not been fairly treated or given the opportunity to discuss what is required of them.

Partners need to agree what percentage of the firm’s profits will be put into the bonus pot, what targets should be set and the key performance indicators that will be used to measure progress in each department.

As well as financial targets, a bonus scheme might also include rewards for improvements in efficiency. In this way everyone has an opportunity to participate rather than being reliant on the efforts of others to determine their bonus.

The success of a bonus scheme relies heavily on partners and managers to provide constant encouragement and to monitor performance against the agreed KPIs. Here again, the departmental scheme may be more effective as managers cannot then complain that their departments have suffered due to the poor performance of others over whom they have no control.

The timing of bonus payments can also be crucial. Many firms stick to the concept of the ‘Christmas bonus’. This can, however, have the unforeseen and unwelcome consequence of a rash of resignations in January. For this reason some now pay 50% of the bonus in December and 50% in June.

Of course, there are still more than a few practices that either have no bonus scheme at all or an extremely arbitrary system based on the personal preferences of the partners with no transparency between the business and the workers. The partners probably spend a good deal of time wondering why they have trouble with recruitment and retention and why their business is not as successful as it should be.

Phil Shohet is a director of Kato Consultancy