| | Holiday bonuses are not
so traditional anymore,
as 59% of companies will
not award them this
year, according to
Hewitt Associates.
However, the prevalence
of variable pay plans
(performance-based
bonuses that must be
re-earned annually)
continues to rise as 78%
of organisations
currently offer a
variable pay program, up
from 51% in 1991.(1)
“Employers recognise
that the value in tying
awards to performance,
as opposed to the
holidays, better
connects employees to
the company’s goals and
objectives, eliminates
‘entitlement’ issues,
and leads to increased
productivity and
improved business
results,” said Ken
Abosch, a business
leader for Hewitt
Associates.
“Organisations remain
under tremendous
pressure to deliver
results, and variable
pay plans continue to be
the most effective way
to reward employees for
their role in helping | |
|
| | the company succeed.”
Hewitt’s 2005 holiday
study reveals that
nearly half (45%) of
companies surveyed have
never offered a holiday
bonus, while 14% have
discontinued their
programs. Of those that
cancelled their holiday
bonus initiatives, 53%
did so between 2000 and
2004, while 26% did so
in the 1990s. And, in
light of recent events
(e.g. tsunami and
hurricane disasters), 9%
of survey participants
said they will direct
some or all of the money
they would have spent on
holiday bonuses to
charitable organisations
this year.
Companies said they
eliminated holiday
bonuses primarily due to
cost (55%), entitlement
issues (50%) and the
development of
pay-for-performance
programs (25%). Of those
companies that never
offered a holiday bonus
program, 40% never
considered such a
program, 39% said it was
due to cost and 23% said
that a holiday bonus
program was not | |
|
| | consistent with their
reward philosophy.
Conversely, of the
41% of companies that
will offer a holiday
bonus program in 2005,
nearly half (44%) will
give employees a gift of
food (e.g. turkey or
ham), 37% will provide
retailer gift
certificates, and 13%
will award cash. These
organisations continue
to provide holiday
bonuses as a way to say
thank you/show
appreciation (57%),
maintain tradition (22%)
and boost morale (18%).
Employees’ take-home
pay is continuing to be
hit hard this year with
increasing health care
costs,(2) flat base pay
increases(3) and rising
energy costs. For the
majority of employees,
variable pay can help
make up where base
salary increases and
holiday bonuses fall
short. In 2005, actual
company spending on
variable pay as a
percentage of payroll
increased to 11.4%, up
from 9.5% in 2004.(4)
Spending on variable pay
in 2006 is projected to | |
|
| | remain strong at 11.1%.
“Employers are
finding
performance-based
programs to be more
motivating and
meaningful to employees
than simply awarding a
holiday bonus. If
employees meet their
individual and company
goals, they can
dramatically increase
their compensation, and,
in most cases, the
payout can be well
beyond a traditional
holiday bonus,” said
Abosch.
Company celebrations
continue to be popular
during the holidays,
with nearly
three-quarters (74%) of
organisations planning
to host a party this
holiday season. Of
these, 27% will spend
$5,000 or less on their
parties, 30% will pay
between $5,000 and
$20,000, and 15% will
spend between $20,000
and $30,000. The median
amount companies will
pay for a holiday party
is $15,000. Of those
that offer holiday
parties, 7% indicated
they will direct some or | |
|
| | all of the money they
would have spent on a
holiday party to
charity.
(1)According to
Hewitt’s “2005-2006 U.S.
Salary Increase Survey”
of more than 1,000 large
organisations.
(2) According to
Hewitt’s annual health
care costs data,
employees’ total health
care costs – including
employee contributions
and out-of-pocket costs
– are projected to be
$3,136 in 2006, up 12%
from $2,810 in 2005.
(3) According to
Hewitt’s “2005-2006 U.S.
Salary Increase Survey”
of more than 1,000 large
organisations. Hewitt
projects salaried exempt
employees can expect a
base salary increase of
3.6% in 2006.
(4) According to
Hewitt’s “2005-2006 U.S.
Salary Increase Survey”
of more than 1,000 large
organisations.
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