Bonuses

Employee morale (if such a thing exists) is a topic that will be covered quite frequently in this space. One of the ways companies try to raise employee morale is by giving a bonus to its employees.

If you have a job, there's a decent chance that your company has some kind of bonus program to reward its hard working employees (and sometimes even the slackers). Usually you have to be a full-time employee, and most of the time the company has to have had a good year, though this isn't always the case. My company used to have a bonus program only for managers, but recently they extended it to include all employees (assuming you met certain time-in-job criteria). This was obviously a nice gesture by the company, and was initially appreciated by its employees. But given the title of this blog, you've probably guessed that there's more to the story.

Back in the "old days" of this company, every employee used to get bonuses, and from what I've been told by people who were here at that time, they were significant. In fact, rumor has it that auto dealerships in the area used to have extended hours when the bonuses were awarded because they were often large enough to purchase a car (or at least make a great down payment).

A few years ago, things changed. New management took over, and many of the perks that were common in the "old days" were suddenly gone, including bonuses (except, of course, for management). The result, surprising as it may seem, is that employee morale went down instead of up! How about that! Take away the bonus, and it hurt employee morale! Who would have thought?

Fast forward a few years and the company, after realizing that many of its employees were abandoning ship, decided it would be in its best interests to do something to try to retain its employees. It was announced that the bonus program was coming back, and it wasn't just for managers anymore. However, the employees quickly discovered, there was a catch.

The bonus program was not an automatic payout each year. It was to be voted on by the Board of Directors, and if they decided not to approve it, the employees were SOL. On top of that, the amount of the bonus varied from person to person, even to the point that some employees may not even receive one even though everyone else on their team did. It all depended on a bunch of variables, most of which were out of the employees' hands.

First of all, the corporation had to have a good year. This means all segments of the company, all over the world. Second, the US division had to have a good year. Third, the section of the US division you were in had to have a good year. And finally, YOU had to have a good review from your manager. And if all four of these criteria were met, you were eligible for a bonus up to four percent of your average pay for the prior year. Read that again. Assuming that the corporation did well, the US division did well, your section did well, and you got a good review, you could get a maximum of four percent of your average earnings from last year. That last part is key - your average earnings are not the same as your end of year salary. If you got a decent raise during the year, you don't get a bonus based on your current salary, you get a bonus based on what your average earnings were. So if you got promoted or got a raise late in the year, it won't have much of an impact on your bonus because most of your earnings for the year were at the lower salary.

So what do we have here? The company, in an attempt to raise employee morale, actually deflated all of the excitement by putting so many conditions on the potential bonus that it took away any joy and good will that it might have created. Certain people in the company, whose section didn't do so well, got smaller bonuses (maybe 1-3%). Other people, in sections that did well, got maybe 2-3% because of a poor review from their manager. I know of at least one person who did not get one at all, even though the rest of the group qualified, because of a poor manager review (she swore her manager hated her). And to top it off, the bonus was a maximum of 4% of average earnings, and don't forget that 40% of the check goes to taxes.

Now, it would be ignorant of me to pooh-pooh this program entirely, because at least the company is trying. However, the straw that broke the camels back is not that these bonuses are miniscule compared to what the company used to do, it's that our competitors outdid us by a wide margin. We were told that part of the reason our company brought back the bonus program was to keep employees from jumping to our competitors, and that their research tells them that our bonus program is in line with our competitors. However, when our employees do leave, we often keep in touch with them because we're friends. Well, several of them who have gone on to work at our competitors have called to let us know that they just got their bonuses, which ranged from 10-16%, and they didn't have to worry about other parts of the company affecting the amount of bonus they received. That to me does not sound competitive.

This is a perfect example of a company trying to do something good for its employees, but shooting itself in the foot in the process. Their attempt to raise employee morale has actually had the reverse effect, as most employees were either worried that they weren't going to get a bonus, or were worried that it would be relatively small (as it turns out, 4% is less than one normal paycheck). So rather than employees being excited about getting a bonus, many actually look down at the whole process and see greener pastures with our competitors.

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