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 company had given bonuses in past years but they stopped them because the local merchants were always badgering the company 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.
When your company 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 reasonable to dump a bonus plan that has gotten out of hand and too expensive.
Our company solved the program by giving a quarterly productivity pay increase that could be raised or lowered according to productivity. We all liked that. One engineer was fired however because the company didn’t think he was worth the increased pay he was getting through the increased productivity of the factory workers.
From what I learned down at the local hardware store, the factory folks would drop in, pick up a washing machine 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 company stopped the bonuses.
I was reading somewhere the other day that that is still happening.
One company 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 increase described?
No! That would not change anything for the company’s bottom line would it?
When things got better, back came the bonuses in a different and better plan.
One company I worked for paid a special bonus for a special achievement. They paid well based on the savings or profits generated. That way usually the most creative people in positions that allow them to change things, such as engineers and supervisors, would get the special bonus. But not a few factory floor people got bonuses just by observing what was going on and suggesting a profitable idea.
I got a bonus right after I joined the company by saving them thousands of dollars in processing cost while reducing required production floor space. I was surprised to receive it. That is what I was paid to do. Engineers that worked for me got bonuses for special achievements that I expected them to do without any extra compensation.
I’m not against bonuses. I think they can raise moral and encourage workers to improve things. Gradual improvements can increase the productivity of a company and improve the quality of goods. Both results can mean more sales to the company. If a company can increase productivity using the same capital equipment, that is all gravy.
Employees need to realize that a benevolent company can have decreased profits and bonuses can’t be paid at times. I think the best thing for a company to do is to pay a bonus at intervals of less than a year.
A quarterly bonus could be better regulated in some companies and there would be less disappointment 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 little larger than normal and the employees would feel compensated.
Years ago a very large company wanted to hire me but they couldn’t match my salary. The reason was that a major part of the pay plan for the company 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 industry my bonus was almost as high as my salary. I could see that the year I left was to be a good year so I stayed with the company 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 company has a need for additional cash- perhaps to invest 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 usually paid to those working under union contract. They are more common with the salaried employees.
One last thing: I worked for a company in Pennsylvania that gave a turkey to each employee on Thanksgiving and Christmas. Later they just gave a cash bonus to everyone that was more than enough to pay for a bird. There was something about that bonus that made a person feel good. It was like the company knew you were there. When I was running a factory I gave the checks out myself making the appropriate wishes to each and every employee. What fun! (Okay, I did the same thing every week with the paychecks. )
Should your company 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 around with the plan you will get burned.
Don’t start or terminate a bonus plan without getting the input of some of those that it will affect. Perhaps you should also consult an expert in the matter.
copyright©John T. Jones, Ph. D.2005
John T. Jones, Ph. D. (email@example.com)is a retired R&D engineer and VP of a Fortune 500 company. He is author of detective & western novels, nonfiction (business, scientific, engineering), poetry, etc. Former editor of international trade magazine. Jones is Executive Representative of International Wealth Success.
More info: http://www.tjbooks.com
Business web site: http://www.bookfindhelp.com (IWS wealth-success books and kits and business newsletters / TopFlight flagpoles)