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When times are tough, businesses must find a way to decrease their spending, and the first thing to be cut is often annual employee bonuses. While it’s never easy to break the news to employees that they won’t be receiving the bonus they expect every year, it can be a valuable strategy to help the company hit its goals without resorting to more drastic measures and reduction events such as furloughs or layoffs.
To help with this process, businesses should have templates ready for all necessary documents and communication to help ensure the process goes over smoothly. This is where a bonus cancellation letter example comes into play. Usually, letters like these are emailed to staff members, alerting them of the impending change. Employees need to know about these issues well in advance so they can plan their finances accordingly. If you don’t properly alert your staff that their bonuses have been canceled, you’ll be setting yourself up for a lot of trouble.
By using a great bonus cancellation letter template, HR leaders and managers can be ready in the event they ever need to implement this cost-cutting strategy. Instead of trying to write every individual bonus cancellation letter ad-hoc during the delicate process, having a template ready ahead of time can save a lot of headaches and stress in the heat of the moment. In this article, we will share a bonus cancellation letter example and review what your own letter template should include.
Bonus Cancellation Letter Example
Let’s start with a bonus cancellation letter example to give you an idea of what your own letter should entail. Below is a bonus cancellation letter template that you can copy and customize for your own organization.
| COPYABLE EXAMPLE:
[Date] Subject: Bonus Cancellation for [insert year] Dear [Recipient Name]: As you may know, [Company Name] has been experiencing financial difficulties for the last several months due to [insert reason(s) here]. In the past year, we have taken action to adapt to these new challenges. Unfortunately, this action has not resulted in increased profitability and [Company Name] has not been able to meet its goals. This has left us with a big decision about how we can get back on track. Over the past month, we have faced the difficult decision of either reducing our staff headcount or exploring other areas of cost reduction so that our employees do not have to lose their jobs. After careful consideration, we have decided that the best course of action for our organization is to eliminate our annual bonuses for each of our employees this year. As you know, this is the first year that [Company Name] will not give out bonus checks. We hope that, with your continued support and hard work, we will be able to return to our yearly bonus system next year. If you have any questions, feel free to contact [insert Contact Name] at [insert telephone number/email address], who is available to answer any questions you may have regarding this bonus cancellation. Please don’t hesitate to reach out if you have any thoughts or concerns. We appreciate all of the good work you have done for [Company Name] and are hopeful that next year will be prosperous, enabling us to reinstate our bonus policy and show our gratitude for all of your hard work, dedication, and loyalty as we continue to strive toward long-term business success. Sincerely, [Signature of CEO or Organization Representative] |
Feel free to copy and customize this bonus cancellation letter example to craft your own template. Of course, remember to consult with your legal counsel to ensure you are including all necessary language and complying with all local, state, and federal laws.
It’s also important to make sure you’ve considered all of your options and identified the most effective downsizing strategies that will have the least impact on your employees and company brand. Click below to download our free reduction resources guide to implement the right cost reduction strategy for your organization.
How to Tell Employees There’ll Be No Bonus
Now let’s break down this bonus cancellation letter example into its key components and what you’ll need to include as you compose your own letter template for employees. Remember, this is just one example to give you a sense of how the letter should flow. You can take this example letter and mold it to your corporate culture.
The good news is that these letters–whether a layoff letter, furlough letter, or salary reduction letter–all work in very similar ways. There are a few elements that are essential to ensure your letter is as thorough and thoughtful as possible.
Here are the five key components to include in your bonus cancellation letter example:
1. Date and addressee: This information is a given. It’s important to note who the recipient of the bonus cancellation letter is, as well as how and when they have received it.
2. Reason for the bonus cancellation: Explain to the employee why the company’s goals were not met and the thought process behind why they will be canceling bonus checks this year. This first section sets the tone, so you need to get right to the point while also explaining that it could be worse. Most employees will be more open to their bonuses being canceled if they understand the alternatives.
3. More details and expectations: Give more details on the timing of the bonus cancellation, including if it will be a one-time move, to be as transparent as possible and set expectations. You shouldn’t try to hide anything in this letter. Not only would that hinder the bonus cancellation process, but it could also foster employee distrust and the spread of misinformation. For example, you could explain that this is a one-time move and that you hope to reinstate bonuses next year when finances even out. This part of the letter should be hopeful, but not untruthful or misleading.
4. How employees can ask questions: Explain where employees can reach out if they have questions. For example, you could offer to meet with any concerned staff members. The point of the letter is to be informative, but some employees are bound to have questions. Again, this will help negate the downsides of a move like this and guard against the spread of misinformation and negative rumors.
5. A thank you for their contributions: End the letter on a positive note by acknowledging the employee’s role and value to the company. You can otherwise sign off like you would with any other employee letter.
Bonus Cancellation Letter: Final Takeaways
When it comes to writing your own bonus cancellation letter example, remember to keep it short and to the point. Don’t try to insert small talk into the email because this will only waste time and potentially confuse your staff.
The best strategy is to get right down to business, providing as much information and explanation as you can while keeping the letter succinct. You want to explain the reason for the bonus cancellation and how it will ensure the company won’t have to hold a layoff or other reduction event. You can also explain that the hardship the company is facing is temporary and that the move to cancel bonuses will not be a permanent policy on the books.
Remember not to sugarcoat things or withhold any important details. You need to be honest, but delicate, in your approach. If done properly, you can help mitigate some of the negative feelings that this letter might cause. A thorough and thoughtful bonus cancellation letter should get the message across in a way that is easy to understand and digest.
At Careerminds, we believe that you can never be too prepared for your next cost reduction event. Our arsenal of resources, templates, guides, and industry-leading outplacement services can help you navigate the delicate reduction in force process. Click below to speak with one of our experts and see if we are the right partner for your organization.
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