Bonuses Replace Pay rises in big Coys
Large employers in the US ae increasingly rewarding senior staff with one-off bonuses rather than permanent pay rises as they seek to avoid locking in unsustainable costs in uncertain times, according to research to be published next week.
Companies are expected to be stingier than ever with average pay rises in 2004 that barely outpace inflation.
The findings, from a survey of 1,700 US-based companies with 3m employees, come in spite of record profitability for much of corporate America. Nevertheless, employers appear to be cautious about how long profit growth can continue. Human resources consultants at the Hay Group estimate payouts for senior management in 2004 will reach 95 per cent of their maximum "target bonus" compared with 81 per cent in 2003. Bonuses for other managerial and professional staff are also up sharply on 2003.
The findings echo similar research into pay rates among board-level executives. Several studies have found chief executives and chairmen are receiving record levels of bonuses in cash and share grants even as companies switch away from stock options and keep basic pay flat.
One study by independent researchers at the Corporate Library estimated total compensation for chief executives at the top 500 US companies rose by 22.2 per cent in 2003 double the previous rate of increase.
But executive bonuses remain in contrast to basic pay improvement for ordinary employees. The new Hay Group study finds median annual merit increases for most employees remain below historical averages in 2004.
Average 2004 pay rises for blue collar workers are the same as last year at 3 per cent, while professional and managerial employees are getting 3.5 per cent all down on previous years. Median increases for senior management of 3.8 per cent are up slightly from 2003, but below 2001 levels.
Consultants say one problem for employers is how to reward performance and attract talent at a time when financial controllers are keeping budgets tight.
Doug Jensen, head of Hay's US reward consulting practice, said: "It is really difficult to feed your egos and starve your turkeys on these budgets."
But the findings may also fuel debate in the US over whether the benefits of this economic recovery are being spread fairly across society a theme championed by John Kerry, the Democratic presidential candidate.
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