You are in : Human Resources

Bonuses and Salaries

Battle with bonuses begins

Wed, 12 Oct 2011 08:43

The end of the year brings with it a time for bonuses and increases, and though this is a festive occasion for most staff, it can often cause a few headaches for employees and employers alike. Gone are the days where, for most employees, the annual bonus was a virtual certainty.

Peter Winn, MD of Manpower SA says, “2011’s difficult business environment, volitile Rand and fluctuating commodity prices have all had a major impact on all sectors of the South African economy, and companies have possibly not been able to achieve the returns and profits expected. Uncertainty about the future performance of the local and international economy has also influeced companies to review their budgets and cut back on spend in an attempt to secure a better position should the economy retract in 2012.

In addition, as perviously highlighted in Manpower’s most recent MEOS survey, the vast majority (83 percent) of South Africa’s employers are not expecting to make any staff changes, while 7 percent are planning to decrease their workforce. Year on year results show a 4 percentage point overall decrease in the employment outlook of employers.”

“These circumstances are key indicators that businesses are possibly not in the position to pay thirteen cheques, or sizable year-end bonuses, possibly to the dissapointment of staff who may not fully understand that bonuses are often linked to the company’s financial performance.”

"Companies are increasingly taking the stance that only those employees who have truly earned bonuses or increases should receive them, and this has lead to the trend in recent years to replace annual bonuses with performance-based appraisals. This shift allows companies to meet their budgets, achieve their business objectives easier, as well as to motivate employees to perform better,” says Winn.

In most cases employees are prohibited from discussing bonuses and salary increases, however this is hard to police and can still cause problems if not managed correctly, which can lead to animosity towards senior staff and the company.

"When giving bonuses, try to ensure that all employees receive something, regardless of how small it is. Don't surmise that employees are naive and won't find out via the grapevine that other employees have received bonuses. This can demotivate and upset employees, making them feel that their contribution to the company is valueless, and ultimately resulting in poorer work performance or even disruptive behaviour," says Winn.

"The company needs to assess what they can afford and how staff are performing. If the year has been highly successful, bonuses will go a long way towards fostering good-will with employees and keeping performance standards high. When staff understand and appreciate that bonuses and increases are based on company performance and not simply an obligation it can motivate them to feel like they 'share' in the company's successes and failures, and cultivate a feeling of responsibility when they do or don't receive rewards at the end of the year."

"It's best to have these policies in place long before the end of the year so that employees understand the nature of their bonuses or increases. It can come as a shock if annual bonuses are suddenly not given after years of setting the trend. If businesses find themselves in this situation, try and let employees know well in advance that this will be the case in order to minimise the surprise and any negative implications. Employers should remember that many employees rely on their bonuses at the end of the year as part of their budget," explains Winn.

“Be sure to be fair. Although this is hard to achieve in the eyes of all employees as their subjective view of the situation may differ to the company's, try to distribute bonuses and increases in a fair and deserving manner.”

"Finally, remember that the gift of time is often even more valuable to employees than money. If employees deserve rewards for their work through the year, but the company is unable to afford bonuses or increases, an extra day or more of leave can create significant appreciation amongst staff," concludes Winn.