Annual bonuses to staff the norm

Annual bonuses to staff the norm

According to research by Towers Watson, most companies (94 per cent) offer an annual bonus to a good proportion of their employees. 

The research, which covered 120 employers, determined that even with the recent economic challenges, bonuses have remained at, or near, target levels over the last few years.

Bonus trends

  • 2011 saw average short-term bonuses were 100 per cent of target;
  • 2012 saw this average drop slightly to 90 per cent; and
  • 2013 is anticipated to be similar to 2012.

Other findings included:

  • 62 per cent of employees are either automatically eligible for bonus or become eligible once they reach a certain grade or band, regardless of any probationary period or length of service;
  • 60 per cent of companies offer tiered bonus plans, containing multiple levels of performance measures; and
  • Eight per cent of companies defer bonuses for any length of time.

Joris Wonders, director of the UK reward practice at Towers Watson, commented: “When designed and implemented successfully, short-term variable pay can be very effective in incentivising employees to perform. However, when organisations pay out bonuses regardless of individual or financial performance the rewards can be perceived as an entitlement, rather than an incentive, and lose their value as an employee motivator. We know that organisations that can encourage high performance from employees perform better financially, so the business case for creating a strong link between pay and performance is clear."