Bonus Plans for 2010 Remain Strong

Salary levels rebound gradually

By Stephen Miller Mar 18, 2010
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The majority of U.S. employers report that their bonus payments in 2010 will be similar to what they paid in 2009, according to a Buck Consultants survey conducted in January 2010.

The survey report, Recovery, Restoration and Retention: 2010 Compensation Trends (available at no charge but registration required), reveals that despite the slow economic recovery:

  • 58 percent of U.S. organizations expect to award bonuses that are within 5 percent of amounts paid in 2009.
  • 21 percent plan to make bonus payments that are 5 percent or greater than 2009 payments.

Although these results might appear somewhat higher than expected, there are plausible explanations, says Tom Burke, director at Buck Consultants. “Companies may have ended the year with earnings performance that was strong enough to meet or exceed their targets. And those targets may have been at levels that were the same as, or even less than, prior targets.”

There are two other factors to consider, adds Burke. “First, companies may be rewarding those employees—especially top performers—who made it through downsizing and have been asked to do more. Second, companies may be more inclined to award bonuses, which are variable costs, rather than to increase base salaries, which drive up fixed costs, including benefits that are tied to salaries.”

Despite the strong figures for performance bonuses, more than 95 percent of participants have no plans to expand or implement bonuses for attracting and retaining employees despite widespread reports about growing worker dissatisfaction.

Managing Performance and

Top Performers

One-third of survey participants report making changes to the way they measure or reward the performance of their employees.

Changes to Employee Performance Assessment in 2010

New performance criteria or objectives will be introduced

16%

Rewards associated with various levels of performance will be revised

13%

New performance rating scale will be introduced

10%

Some or all performance requirements will be raised

9%

Other

5%

Not making changes

67%

Actions to Retain Top Performers

Market pay adjustments

30%

Larger base pay increases

23%

Larger bonus opportunities

18%

Retention bonuses

10%

Accelerated promotions

8%

Other

12%

None of the above

37%

Source: Buck Consultants

Raises Up, but Not as High as Projected

Pay increases for 2010 are expected to average 2.2 percent, the survey found. This is greater than 2009's average but slightly less than the 2010 projections made by companies in a survey Buck conducted in July 2009. Average raises will range from 3.3 for accommodation, hospitality and food services to 1.9 for telecommunications.

“Overall, economic conditions appear to be improving slowly,” Burke says. “We’re seeing a gradual lifting of pay freezes and hiring freezes. Companies that implemented salary cuts are restoring salaries in most cases. Employers realize the importance of reinvesting in their workforces as the economy shows signs of recovery. At the same time, they are being cautious so they are in sync with business performance.”

The survey, completed in January 2010, includes responses from 180 employers representing a wide range of sectors of the U.S. economy.

Stephen Milleris an online editor/manager for SHRM.​

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