In 1997 I moved to Colorado to work as a research engineer. We lived in a small town in the mountains. That's when I learned that my firm had given bonuses in past years but they stopped them because the local merchants were always badgering the firm about the bonuses that didn't come and the smaller- than-usual bonuses.
I didn't learn this from the company; I learned it from the guy at the hardware store.
Four Door Refrigerator
When your firm cut your bonus and said, "We had to do it because the local merchants complained to us," they may not be kidding.
Then again, it is cheap to dump a bonus plan that has gotten out of hand and too expensive.
Our firm solved the agenda by giving a regular productivity pay growth that could be raised or lowered agreeing to productivity. We all liked that. One engineer was fired however because the firm didn't think he was worth the increased pay he was getting straight through the increased productivity of the facility workers.
From what I learned down at the local hardware store, the facility folks would drop in, pick up a washing engine or refrigerator, and tell the owner that they would pay for it as soon as they got their bonuses. Then they would get no bonuses or a too-small bonuses.
The storeowner would say, Ouch!"
That's when he would call the factory: "You guys have got to pay a decent bonus over there so that your employees can pay for the stuff they are dragging out of my store."
So the firm stopped the bonuses.
I was reading somewhere the other day that that is still happening.
One firm I worked for cancelled our bonuses saying that our pay would be raised to compensate for the past bonuses. They said that they had to stop the bonuses because of the merchant situations described above.
That was a bunch of bull, of course. The truth was that the bonus expense was too high and not justified by current sales.
Did we see the growth described?
No! That would not turn anything for the company's lowest line would it?
When things got better, back came the bonuses in a different and best plan.
One firm I worked for paid a extra bonus for a extra achievement. They paid well based on the savings or profits generated. That way commonly the most creative citizen in positions that allow them to turn things, such as engineers and supervisors, would get the extra bonus. But not a few facility floor citizen got bonuses just by observing what was going on and suggesting a profitable idea.
I got a bonus right after I joined the firm by salvage them thousands of dollars in processing cost while reducing required yield floor space. I was surprised to receive it. That is what I was paid to do. Engineers that worked for me got bonuses for extra achievements that I unbelievable them to do without any extra compensation.
I'm not against bonuses. I think they can raise moral and encourage workers to heighten things. Gradual improvements can growth the productivity of a firm and heighten the ability of goods. Both results can mean more sales to the company. If a firm can growth productivity using the same capital equipment, that is all gravy.
Employees need to realize that a benevolent firm can have decreased profits and bonuses can't be paid at times. I think the best thing for a firm to do is to pay a bonus at intervals of less than a year.
A regular bonus could be best regulated in some fellowships and there would be less discontentment if a bonus was missed. If a small bonus was earned it could be added to any bonus generated the next quarter. That way the second bonus could be a minute larger than general and the employees would feel compensated.
Years ago a very large firm wanted to hire me but they couldn't match my salary. The reckon was that a major part of the pay plan for the firm was in bonuses. I could have taken the offer and done well financially, but I didn't want to work for such a humongous company.
When I retired from manufactures my bonus was approximately as high as my salary. I could see that the year I left was to be a good year so I stayed with the firm until the end of the fiscal year.
There are advantages and disadvantages to bonuses. One advantage is that you can lower the pay of the employees during hard times or when the firm has a need for added cash-- perhaps to spend in capital equipment.
The disadvantage is that the employees expect a bonus and moral drops precipitously when the bonus is not paid.
Bonuses are not commonly paid to those working under union contract. They are more common with the salaried employees.
One last thing: I worked for a firm in Pennsylvania that gave a turkey to each laborer on Thanksgiving and Christmas. Later they just gave a cash bonus to everybody that was more than sufficient to pay for a bird. There was something about that bonus that made a someone feel good. It was like the firm knew you were there. When I was running a facility I gave the checks out myself production the acceptable wishes to each and every employee. What fun! (Okay, I did the same thing every week with the paychecks.)
Should your firm give a bonus?
If so, how and what?
Should you stop giving bonuses?
How and when?
If you don't do the first you don't have to worry about the second, do you?
Still, bonuses can attract good employees and raise the moral of your current employees all at the risk that you will get into trouble with local merchants
The risk may be worth it. Just make sure that the plan is well documented for the employees and that it is always administered the same way. Once you start fiddling nearby with the plan you will get burned.
Don't start or cease a bonus plan without getting the input of some of those that it will affect. perhaps you should also consult an master in the matter.
Happy Workplace!
The End
copyright©John T. Jones, Ph.D.2005
What! No Bonus!
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