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By John Rossheim, Monster Senior Contributing Writer
Your boss makes you an offer you can't refuse: A 10 percent bonus for your above-the-call-of-duty accomplishments in the last year. Your smile reaches ear to ear, and visions of consumer gluttony fill your head -- a 60-inch flat-screen TV for him, a week at a Sonoma Valley spa for her.
What's not to like about your workplace windfall? Yes, you'll have to prove yourself again this year, but it's hard to whine about that. Here's the real rub: The company will also have to do reasonably well to maintain your bonus, and overall financial performance is something most of us can't influence.
Moreover, from year to year, you may notice that your base pay is only inching up. Those puny salary increases, often barely above inflation, give you little upward mobility over time. That could cast a long shadow over your financial future.
More Workers Getting Bonuses
Whether you emphasize the positive or negative in performance-based annual bonuses, they're a fixture of the 2000s. "The percentage of companies offering short-term incentives [such as annual bonuses] to at least one employee group grew slightly in 2004 to 81 percent," says the "2004/2005 US Compensation Planning Survey" by Mercer Human Resource Consulting Inc.
Although bonuses are being extended to employees at ever-lower ranks in the corporation, upper management still walks away with the lion's share. Annual bonuses are expected to hold nearly steady in 2005, according to Mercer, at 33 percent of base pay for executives, 18 percent for managers, 11 percent for professional staff and 5 percent for hourly workers.
Bonuses Tie Pay to Business Risk
The goal of employers in allocating part of payroll to performance-based bonuses is to shift some business risk and upside potential to employees. "Employers are saying, 'We want to have payroll somehow correlate with the performance of the individual, the department and the company,'" says Mark Haering, senior partner with Princeton Search Group, an Indianapolis recruiter.
"Companies want to know how to reward people without raising fixed costs," says Laura Hanf, a senior compensation consultant with human resources consulting firm Findley Davies Inc. in Charlotte, North Carolina.
Will Large Employers Negotiate Your Bonus Structure?
Risks associated with bonus programs makes many workers nervous, since they may be counting on that biggest paycheck of the year to sock away for retirement or make a balloon payment on the mortgage.
Can you negotiate a different arrangement with your large employer? "From an employee's perspective, you’re probably not going to have a say," says Scott Oliver, a consultant with Workscape Inc., a provider of human resource services in Framingham, Massachusetts.
Unless, of course, you wield substantial power. "The higher up in the workforce pyramid you get, the more likely it is that the company will be willing to get creative" with the bonus structure, says Haering. "You have to be someone that can have a wide-ranging impact in the organization." Typically, bonus pay negotiability comes in at the director level or above.
Small Employers May Be More Flexible
Small employers are more likely to welcome discussion of whether bonuses make sense and the criteria for awarding them.
That's the case at Corporate Ink Public Relations Ltd., an eight-person firm in Newton, Massachusetts. "We have an aggressive compensation program, including profit-sharing and bonuses," says president Amy Bermar.
"The shift we're talking about now is making staff know what they can do to take home more pay at the end of the day," Bermar explains. To get input on her decisions on how to reformulate bonuses and total compensation, "I'm enlisting managers to tell me what they think would be the right performance benchmarks."
Do the Math for the Long Run
Whatever the structure of your total compensation, keep an eye on long-term trends. If your annual bonus program takes away two percentage points from each annual raise -- say your salary increase is 3 percent per year plus an annual bonus, versus 5 percent annual increases before the bonus program -- your base pay would fall behind by more than 10 percent (including compounding) over five years. Workers planning for the future will need to save and invest at least some of each bonus to compensate for this salary shortfall.
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Annual Bonuses on the Upswing
March 7, 2005
By John Rossheim, Monster Senior Contributing Writer
Your boss makes you an offer you can't refuse: A 10 percent bonus for your above-the-call-of-duty accomplishments in the last year. Your smile reaches ear to ear, and visions of consumer gluttony fill your head -- a 60-inch flat-screen TV for him, a week at a Sonoma Valley spa for her.
What's not to like about your workplace windfall? Yes, you'll have to prove yourself again this year, but it's hard to whine about that. Here's the real rub: The company will also have to do reasonably well to maintain your bonus, and overall financial performance is something most of us can't influence.
Moreover, from year to year, you may notice that your base pay is only inching up. Those puny salary increases, often barely above inflation, give you little upward mobility over time. That could cast a long shadow over your financial future.
More Workers Getting Bonuses
Whether you emphasize the positive or negative in performance-based annual bonuses, they're a fixture of the 2000s. "The percentage of companies offering short-term incentives [such as annual bonuses] to at least one employee group grew slightly in 2004 to 81 percent," says the "2004/2005 US Compensation Planning Survey" by Mercer Human Resource Consulting Inc.
Although bonuses are being extended to employees at ever-lower ranks in the corporation, upper management still walks away with the lion's share. Annual bonuses are expected to hold nearly steady in 2005, according to Mercer, at 33 percent of base pay for executives, 18 percent for managers, 11 percent for professional staff and 5 percent for hourly workers.
Bonuses Tie Pay to Business Risk
The goal of employers in allocating part of payroll to performance-based bonuses is to shift some business risk and upside potential to employees. "Employers are saying, 'We want to have payroll somehow correlate with the performance of the individual, the department and the company,'" says Mark Haering, senior partner with Princeton Search Group, an Indianapolis recruiter.
"Companies want to know how to reward people without raising fixed costs," says Laura Hanf, a senior compensation consultant with human resources consulting firm Findley Davies Inc. in Charlotte, North Carolina.
Will Large Employers Negotiate Your Bonus Structure?
Risks associated with bonus programs makes many workers nervous, since they may be counting on that biggest paycheck of the year to sock away for retirement or make a balloon payment on the mortgage.
Can you negotiate a different arrangement with your large employer? "From an employee's perspective, you’re probably not going to have a say," says Scott Oliver, a consultant with Workscape Inc., a provider of human resource services in Framingham, Massachusetts.
Unless, of course, you wield substantial power. "The higher up in the workforce pyramid you get, the more likely it is that the company will be willing to get creative" with the bonus structure, says Haering. "You have to be someone that can have a wide-ranging impact in the organization." Typically, bonus pay negotiability comes in at the director level or above.
Small Employers May Be More Flexible
Small employers are more likely to welcome discussion of whether bonuses make sense and the criteria for awarding them.
That's the case at Corporate Ink Public Relations Ltd., an eight-person firm in Newton, Massachusetts. "We have an aggressive compensation program, including profit-sharing and bonuses," says president Amy Bermar.
"The shift we're talking about now is making staff know what they can do to take home more pay at the end of the day," Bermar explains. To get input on her decisions on how to reformulate bonuses and total compensation, "I'm enlisting managers to tell me what they think would be the right performance benchmarks."
Do the Math for the Long Run
Whatever the structure of your total compensation, keep an eye on long-term trends. If your annual bonus program takes away two percentage points from each annual raise -- say your salary increase is 3 percent per year plus an annual bonus, versus 5 percent annual increases before the bonus program -- your base pay would fall behind by more than 10 percent (including compounding) over five years. Workers planning for the future will need to save and invest at least some of each bonus to compensate for this salary shortfall.
Executive Search | Recruitment Process Outsourcing | Contract Staffing | College Recruiting | Site Map
This site is optimized for 1024x768 resolution and Internet Explorer.
Copyright © 2010 PrincetonOne