in approximately one-third of all companies are eligible for bonuses
of some kind. Bonuses are given to employees to serve the following
purposes: to create incentives to reduce costs; to pay people for
doing a good job; and to encourage employees to think like shareholders.
reflect your level of responsibility in the organization, making
up a larger portion of your total compensation as you take on more
responsibility. To ensure accountability and to reward you for your
responsibilities, companies tie portions of employees' pay to both
individual and company successes. Corporate triumphs take on greater
importance in your bonus as you climb the corporate ladder. This
is because at higher levels of the organization, you are more accountable
for the success of the company.
was only recently that only managers were eligible for variable
compensation and stock options. But by the late 1990s all that had
changed. As America woke from its recessionary slumber and entered
into the 20th century's longest and most powerful economic expansion,
shareholders and executives began to make unprecedented wealth.
newly created wealth followed closely on the heels of the slash-and-burn
employee policies of the early 1990s that created much unemployment
and loss of benefits for many workers. Company loyalty was damaged
irreparably as employees watched their companies' executives make
more and more money while their own employment and benefits were
being taken away. This was to change, however, as the strong economy
began to benefit all employees.
despite the current economic slump, there is a shortage of qualified
employees in certain jobs. Companies have to work hard to attract
and retain their workforces. Last year, companies were including
more of their workforces in their annual incentive plans and, in
some cases, even including nonexempt hourly workers. The rationale
was that not only did it place the company in a better position
to keep the employee, but it also allowed employees to share in
the "wealth" created by their activities.
course, if the company doesn't create much wealth, there isn't much
to share. In contrast to base salary, bonuses are usually not guaranteed
from year to year, so they can be an effective way for an employer
to have a lower fixed component of its personnel budget, said Bill
Coleman, Senior Vice President of Compensation at Salary.com. In
the current environment, he said, performance-based bonuses are
almost certain to go down.
your company is struggling to meet its earnings targets this year,
you'll probably find that your bonus will be smaller, if you get
a bonus at all," Coleman said. "In today's economic climate,
some employees whose companies paid generous bonuses will be tempted
to leave in favor of situations with a higher base pay," he
bonus plans can be invaluable to employees who want to know what
they need to do to succeed in a company. Bonus plans communicate
the values the company stands for and the behaviors it celebrates.
The people who get promoted at a company also get the biggest bonuses
and the most recognition.
way to be successful at a company is to get noticed. And the best
way to get noticed is to do the things that will earn you a good
bonus. So when you start a new job, learn what plans your company
offers; read the company newsletter and the bulletin board; and
learn the unwritten rules about what gets rewarded. Pay close attention
to the employees who get recognized and promoted. Notice what they
do and how they do it to get clues as to what actions and cultural
behaviors are prized. And organize your work around meeting the
criteria for bonuses. Also, volunteer for special projects since
those will often get you visibility and a bonus.
Dwight Ueda, Salary.com Contributor