Should Bonuses Happen This Year?

© AdobeStock
With no speedy economic recovery in sight, leaders are trying to figure out if they can pay bonuses this year – and what happens if they don’t.

With all that has happened, the end of the year can’t come soon enough for most employees. And even more so if it comes with a bonus.

Right now, however, that decision is not yet clear for most organizations. On the one hand, experts say corporate leaders are increasingly dour on the idea of an economic recovery in the second half of the year. But as the pandemic drags on, leaders are also under pressure to reward employees who have remained productive and engaged despite heightened workloads, job insecurity, and a lack of in-person contact.

Even though budgets are constrained, leaders should look for ways to balance what employees contribute and what they get back in return. Put another way, bonuses would go a long way toward helping leaders sustain the extra effort of their employees. Many employees are being asked to do more with less. In these kinds of environments, employees are generally more influenced by monetary rewards than they are in normal circumstances.

Many firms are still in the deciding stage, but numbers from late spring may offer some clues. According to a Korn Ferry survey of some 3,500 executives in May, 16% of their organizations were not planning to offer bonuses this year, and another 40% were unsure of what the payout will be, if there is one. Of the organizations surveyed that plan to distribute bonuses, 33% expected payouts to be less than originally intended, and 12% anticipate them to be at or above the target level.

The reason for the variation has stemmed from organizations increasing the use of management discretion in evaluating employee performance this year. Given the environment, we are seeing the lowering of performance metric thresholds with lower corresponding payouts at these thresholds. Other changes include a refocusing of performance metrics and a shorter measurement period for performance.

Paying out a bonus, even if lower than planned, could help blunt mounting employee frustrations about wages and safety concerns as the pandemic drags on, experts say. According to a recent poll, for instance, engagement has fluctuated between 31% and 40% over the last three months, as the racial protests and rising number of new virus cases increase the feeling of battle fatigue among employees. The same poll showed 13% of employees are actively disengaged—those who are unhappy with their work experiences—while the remaining 47% are not engaged, defined as mentally unattached to their organizations.

All of this creates a very dynamic situation, with many organizations having to balance taking care of their employees with maintaining financial viability. Bonuses alone won’t buy organizations employee engagement, but it could help create a sense of balance for employees relative to what they are being asked to deliver.

  • Get the StrategicCFO360 Briefing

    Sign up today to get weekly access to the latest issues affecting CFOs in every industry

    "*" indicates required fields

    Send me more information about the CFO Peer Network.
    A members-only peer network for CFOs. Members meet both online and in-person a few times a year.
    This field is for validation purposes and should be left unchanged.