Tesco has ceased paying employee bonuses, Sainsburys has also removed bonuses and Asda is changing staff contracts to pay a higher hourly rate in return for productivity improvements. Should you?
For over 25 years, before joining mainstream HR, I worked in and around bonuses. From rate-fixing to company-wide profit sharing I have seen options in shoe manufacture, steel making, and rubber and plastics production.
At a Dunlop owned company, I designed and implemented a profit-sharing scheme for the factories. It was a success. Shop floor workers saw opportunities for increasing productivity that managers had overlooked or dare not attempt to implement. Productivity and bonuses rose, and I subsequently implemented the scheme across the company. Unfortunately, in an industry with high fixed (capital) costs, an economic downturn severely damaged profit and with it the bonuses. Positively, perhaps, this was accepted by employees in a way that a reduction in the hourly rate would never have been.
Despite my experience, or perhaps because of it, I have mixed feelings about bonuses. They work well on their introduction, but they soon become accepted as part of normal remuneration. The period over which they improve productivity, even without an economic downturn, is limited.
Like many management strategies bonuses, as a motivational tool, tend to come and go. For the supermarkets they are clearly in the “going” phase. Maybe for you?
Malcolm Martin FCIPD
Author Human Resource Practice