UK businesses to make bonuses harder to earn

News Article - 20 July 2010
Category: Business

A new report by the Hay Group reveals businesses in the UK are putting more emphasis on short-term financial incentives, such as bonuses, as the economy emerges from recession. Bonus structures are also changing considerably, with tougher performance thresholds and scrutiny at the highest levels raising the stakes for employees looking to make the most of bonus schemes.

The report, which broadly studies how companies are using bonuses and other incentives in the post-recession climate, is based on the views of HR professionals working in 1,300 firms worldwide. 132 companies are based in the United Kingdom.

One of the most common actions being taken post-recession is increasing the proportion of variable pay relative to base salaries (46%). 28% of companies have already achieved an increase, with a further 18% planning to do so over the next two years. 35% also plan to increase funding for bonuses and incentives: 20% have done so already and 14% will do so in the next two years.

A significant 52% of firms are increasing performance thresholds for variable pay, making it harder for employees to qualify. Metrics for judging performance are also moving towards hard financial targets (55%), with less capacity for bonuses based on effort. Sales, revenues and profits have been highlighted as metrics likely to be utilised.

Bonuses and incentives are also likely to be scrutinised at higher levels, with two thirds of UK businesses believing the boardroom will be involved in decision-making with regard to variable pay. 61% of HR professionals feel that closer alignment of incentives with business strategy will be the key driver of change, which may help explain the increasing levels of boardroom involvement.

UK firms are clearly putting a greater emphasis on bonuses and incentives as the economy begins to stabilise. Employee productivity increases are essential if companies are to compete successfully for market share in the post-recession climate. Offering more agreeable bonus schemes is a common and popular method for improving the employee-employer relationship and, through this, overall productivity. However, there are other methods, and it is important policies are focused according to employee needs to achieve maximum productivity increases.

Access HR software helps companies find out exactly what staff are thinking; the web-based technology utilised in the learning and development module allows staff members to leave copious feedback on a range of activities, including training and appraisals. By collating this information, HR professionals can ensure incentives are directly tailored to individual employees where appropriate, helping to increase productivity across all departments.

For more information, please call Access on 0845 345 3300.

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