Not a Member? Get access to HR news and resources that you can trust.
HR professionals can play a key role in creating business efficiency—starting with their own department.
Is your employee handbook ready for the New Year? With SHRM’s Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Get the HR education you need without travel expenses or time out of the office.
We don't just visit a city, we take it over. Join us in NOLA -- June 18 - 21, 2017.
How to break the news that employees won’t get their annual increase despite hard work
especially when tied to workers’ performance, are typically a way for
employers to encourage hard work, innovation and loyalty—all of which
contribute to a company’s bottom line.
But what happens when that
bonus doesn’t materialize, maybe because an organization took a sudden
financial hit or because profits didn’t come in as expected?
the news to employees that they won’t be getting bonuses—especially
after they have toiled over setting goals and meeting quotas in
anticipation of being rewarded for their efforts—is never an easy thing
Simply Hired, an employment website, noted that for 2015, 6.6
percent of white-collar industries are expected to specifically mention
bonuses in their job descriptions—up from 5.9 percent in 2014.
the high end is the health care industry: 13 percent of health care
companies are expected to tell prospective employees that they offer
bonuses—up from 12 percent in 2014.
"Health care is an industry that
has been recruiting and hiring heavily over the past several years,”
said Susan Martindill, Simply Hired’s director of marketing. “Jobs for
nurses saw 7.5 percent growth in the month of December  alone.
Health care companies are likely using proactive mention of bonuses in
their job descriptions as a way to attract candidates.
”On the low
end are the arts, design, entertainment, sports and media industries,
where 2.4 percent of organizations will likely mention bonuses.
doesn't mean that those [lower-end] jobs don't offer bonuses, just that
they don't explicitly say so in the job description,” Martindill said.
Yet, for jobs where bonuses are advertised, there is a risk: “With
employer brand being top of mind for many employers today, companies
should be careful about the perception involved in using bonuses to lure
in candidates but then not providing those bonuses.”
qualify their policies by stating that bonuses are discretionary,
meaning they cannot be guaranteed and that the health of the business
may dictate the amount of bonuses. In the event where no bonus can be
given, how news affects employee morale depends in part on individual
workers’ attitudes and in part on how the company delivers the
For starters, it’s important to deliver
that news as soon as possible, said Tim Low, vice president of marketing
at PayScale Inc., an online salary, compensation and benefits
“More and more, employees want transparency from
the leaders in their company,” he said. “This trend is part of the wave
of Millennials in the workforce who are more comfortable sharing the
specifics of their compensation package. Bonuses are no different. If a
company is not paying bonuses, managers should communicate the news to
employees as early and as broadly as possible so they can maximize their
credibility with employees. People understand there are economic
realities to running a company which might impact bonuses, so an open
and honest approach is always best.”
If senior leaders are
guaranteed bonuses by contract, they should consider forgoing them to
maintain their credibility, and to show solidarity with lower-level
workers who won’t be getting them.
Companies may also want to
consider delivering bonuses regardless of company profits, wrote Art
Jacoby, a Baltimore, Md.-based small business expert who owns Jacoby
Growing Companies, on his website.
“A small amount of economic
thoughtfulness when the chips are down will build extra loyalty and be
remembered and appreciated for years,” he wrote. “Anybody can be
thoughtful when things are going well. It takes a special leader to be
thoughtful even when it’s tough to be.”
If a company’s cash flow is
insufficient to cover bonuses, alternatively think about giving turkeys
or holiday baskets filled with holiday treats, grocery store or gas
cards, gift certificates to a favorite local restaurant, or paid time
Long before delivering any news about bonuses, however,
companies should be working continually to remind employees of their
First, ensure that base pay is commensurate with
market salaries, Low said, “to ensure employees feel they are getting a
good deal on an ongoing basis.”
"Employers should take a hard look
at their compensation program and ensure they are paying employees the
right salary to compete in the volatile talent market,” he said.
“Cutting costs when it comes to compensation is never a good strategy.
Companies pay much more in the long run when they have turnover of good
employees who go looking for a better deal because they don't feel they
are compensated fairly.”
Companies should consider providing
employees with a personalized compensation summary at some point during
the year “because employees rarely get a view of their entire
compensation package,” Low added. This summary could outline all aspects
of an employee's compensation—base pay, benefits, retirement package,
vacation, medical pay and training allotments.
companies should also articulate their plan to improve company
performance for the following year to improve the chances that employee
bonuses can be reinstated and to let workers know what they themselves
can do to improve their odds for a future bonus.
Dana Wilkie is an online editor/manager for SHRM.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
SHRM Talent Management Conference & Expo
SHRM’s HR Vendor Directory contains over 3,200 companies