A Change in Bonuses Can Look Grinchy, but It Doesn’t Have To

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Genevieve Douglas

Some employees expecting holiday bonuses this year may be left empty-handed or worse--like the fictional Clark Griswold in “National Lampoon’s Christmas Vacation.” Griswold was counting on a substantial check to cover his swimming pool down payment but got a Jelly of the Month club subscription instead.

Regardless of a company’s rewards or bonus structure, transparency about what workers can expect and what changes may happen is key to keeping engagement up, Andrew Challenger, vice president of outplacement firm Challenger, Gray & Christmas, told Bloomberg Law.

Thirty-five percent of 150 human resources executives said they won’t be offering year-end awards to employees, up from 30 percent in 2016, according to research from the company. Some 39 percent of companies are planning to give a cash bonus, down 2 percent from last year.

Communication is the key to avoiding disappointment. Any change in a rewards program that may affect employees’ bonuses should be addressed quickly and not at the moment workers are expecting to see a bump in their paycheck, Alison Avalos, director of research and certification for WorldatWork, told Bloomberg Law. “You can’t wait until the holiday season to talk about the change. You need to be setting expectations for rewards throughout the year,” she said.

Year-Round Generosity, Total Rewards

Many companies have moved on from the tradition of only doling out rewards at the end of the calendar year, Laura Sejen, managing director of human capital and benefits for Willis Towers Watson, told Bloomberg Law. The large majority of companies have transitioned to formal, annual incentive plans for broad-based employees, and those are tied to the fiscal year, Sejen said.

An ever-changing economy and labor market mean employers will position themselves best by focusing on total rewards packages, Avalos said, because they can better manage employee expectations. “If the holiday bonus is the only reward to keep employees engaged, it’s not working,” Avalos said. “There needs to be more that employers do to give employees rewards beyond cash payouts.”

According to Avalos, there are lots of ways employers can give rewards that don’t include a cash payment to employees, but “there’s no one-size-fits all solution.” Depending on the type of workforce, type of work being done, the competitive nature of the market, or corporate culture, rewards packages should vary, she said. Any rewards package, however, should include a balance between health-care benefit rewards, time-off rewards, flexible work program rewards, and room for growth in the pay structure, she said.

Recognition programs can also help alleviate the need for some monetary-based rewards programming, and can take a lot of pressure off of the annual bonus, Sejen said. Opportunities for employee recognition are event-based, and allow managers to recognize and reward employees in real time when they make an achievement. Recognition programs are “really good tools” because they aren’t dependent on an annual cycle like performance management programs and annual merit increases, and can do a lot for morale, Sejen said.

Transparency Is Key

Challenger said that if there’s a change in bonuses, the news should first come from the CEO. Leadership should communicate why changes have occurred, and also what’s being done to avoid a similar outcome for subsequent years, he said. “You need to make sure that your top performers understand” that they’re still valued, and figure out a way to recognize great performances even if it can’t be done monetarily, he said.

Managers have a key role, too, Sejen said. “If managers are the front line of communication to employees about bonus rewards and opportunities, you need them to be fully informed on the plan designs, and able to convey clearly the company’s incentives.” This includes information to employees on everything from their target business goals, the range of rewards available, minimum thresholds for performance reviews, and how leadership differentiates rewards based on performance, she said.

“The good news is organizations are moving in this direction, but the bad news is that companies continue to struggle with transparency at both the company culture level and down to the individual manager,” Sejen said. “Employees who understand the basis for their compensation are hugely more engaged in their work than those who don’t.”

To contact the reporter on this story: Genevieve Douglas in Washington at gdouglas@bloomberglaw.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com, Tony Harris at tharris@bloomberglaw.com

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