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For those giving bonuses in 2011, only 17% plan increases over 2010
In an era of tighter cost controls, the tradition of the year-end bonus or gift among small employers might be fading. Roughly 43 percent of American HR executives at mostly small firms said their companies do not award year-end bonuses, perks or gifts to employees. That is up from 2007, when a similar survey found that 28 percent of companies don’t award year-end bonuses.
The survey conducted in November 2011 by outplacement consultancy Challenger, Gray & Christmas Inc. found that some 53 percent of mostly small U.S. companies planned to award bonuses or gifts during the holiday season.
Year-End Bonuses and GiftsAmong mostly small U.S. employers, in 2011 respondents planned to :
Award a nominal ($100 or less) bonus to all employees.
Award a bonus amount based on the company's overall annual performance.
Award a bonus to selected/eligible employees based on individual performance.
Award a non-monetary gift to all employees.
Total that planned to award a bonus or gift at year-end.
Will not award any type of year-end holiday bonus or non-monetary gift.
Source: Challenge, Gray& Christmas Inc. Figures rounded.
Small Firms Pressured
“A lot has been reported about the large number of companies that are flush with cash. It is important to understand that these are mostly large public companies, most of who are among the Fortune 500. The vast majority of U.S. employers are small, most with fewer than 100 workers on their payrolls. Many of these companies do not have the funds to award extravagant year-end bonuses,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.
The latest available statistics from the U.S. Census Bureau show that of the 6 million employer firms counted in the U.S. in 2007, 5.9 million had fewer than 100 employees. Of these firms, 4.6 million (or more than three-quarters) had sales receipts totaling less than $1 million.
There could be several reasons for the shift away from traditional year-end bonuses, Challenger noted. "Certainly, the economic conditions of the last four years have contributed. After payroll, insurance costs, equipment and supplies, the vast majority of employers probably do not have much left over to throw into a bonus pool,” he pointed out.
In addition, some companies might have found that year-end bonuses are not the morale booster they once were and that year-round efforts are a more effective way of increasing employee loyalty and engagement—and for rewarding high performers.
For the surveyed employers that continue to award year-end monetary bonuses in 2011:
• 75 percent will award bonuses of about the same size as in 2010.• 16.7 percent will increase the size of their bonuses.• 8.3 percent will lower the size of their bonuses.
• 75 percent will award bonuses of about the same size as in 2010.
• 16.7 percent will increase the size of their bonuses.
• 8.3 percent will lower the size of their bonuses.
The one area of the economy that will probably never abandon the year-end bonus is the financial services sector. The year-end bonus typically makes up a larger part of these workers’ annual pay; this system is unlikely to change, as it is a risk-based business that requires risk-based pay, Challenger said.
According to a compensation survey by consulting firm Johnson Associates, Inc., Wall Street bonuses are expected to shrink by 20 to 30 percent in 2011 (see the SHRM Online article "Incentive Awards at Financial Services Firms Set to Drop"). That still means that the average managing director will take home about $900,000 in year-end bonus money, down from $1.2 million a year earlier.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
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