A: Over two-thirds of firms — 70 per cent — operate bonus schemes in the UK and one-third of those who don't are planning to introduce a scheme, the Industrial Society says.
According to a survey of 1,128 organisations carried out by the society, a non-profit making body which promotes training for managers across the UK, improved business performance is the most common reason given by firms for operating a bonus scheme. The second reason is to create an obvious link between individual and company performance.
Q: Do schemes cover all levels of staff?
A: Not necessarily. According to the report, senior staff are most likely to be covered by existing schemes (33 per cent) while process workers (two per cent) are the least frequently covered. Managers and core employees are covered in 23 per cent of cases and technical /professional staff in 15 per cent of cases.
Q: How are bonus schemes organised?
A: Bonuses are usually linked to performance or results and paid in addition to an employee's basic salary. They can be related to the output of the team or business unit. They can be based on gainsharing — where a proportion of savings made from more efficient use of resources is passed on to employees. They include sales commission and piecework or payment by results which measures and rewards individual output.
According to the survey, company-wide targets are the most common basis for bonus schemes, and used by 48 per cent of those surveyed. Most organisations operate one bonus schemes although one-third operate three different schemes. The majority are paid annually and are operated on a proportional basis where there is an equal relationship between increases in performance and increases in payments.
Q: What are they worth?
A: Bonus payments make up less than five per cent of employee pay in the majority of cases (24 per cent). Senior executives and directors have the largest proportion of the salary 'at risk' if performance related.
The Industrial Society estimates that people earning the national average wage or lower should receive no more than 10 per cent of their total salary in bonuses. For those paid at higher levels, it might reflect organisational culture and business objectives to increase the 'at risk' bonus element of the pay packet.
Source
The Facilities Business
Postscript
Bonus Payments, is published by the Industrial Society as part of its Managing Best Practice series.
Tel: 0870 400 1000
www.indsoc.co.uk