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[IWS] Hewitt: HOLIDAY BONUSES DECLINE/Pay-for-Performance INCREASES [16 November 2004]

IWS Documented News Service
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Institute for Workplace Studies                 Professor Samuel B. Bacharach
School of Industrial & Labor Relations          Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor                  Stuart Basefsky
New York, NY 10016                      Director, IWS News Bureau
________________________________________________________________________

November 16 , 2004

The Season of Giving Does Not Include Holiday Bonuses, According to Hewitt Associates

More Companies Favor Pay-for-Performance as a Way to Award Bonuses
http://was4.hewitt.com/hewitt/resource/newsroom/pressrel/2004/11-16-04.htm

LINCOLNSHIRE, Ill. -- Consistent with recent years, most U.S. companies (63 percent) will not award a holiday bonus this year, according to Hewitt Associates, a global human resources services firm. Meanwhile, the number of organizations offering variable pay plans (performance-based bonuses that must be re-earned annually) continues to increase, from 59 percent in 1995 to nearly 80 percent in 2004.*

With increased pressure to improve business results, more companies are moving to variable pay programs,said Ken Abosch, a business leader for Hewitt Associates. Variable pay is designed to help employees concentrate on company goals and objectives, while eliminating entitlementissues that often arise with a holiday bonus.

Hewitt's 2004 holiday study reveals that nearly half (46 percent) of companies have never offered a holiday bonus, while 16 percent discontinued their programs. Of those organizations that canceled their holiday bonus initiatives, 54 percent did so in the 1990s, and 43 percent did so between 2000 and 2004.

Companies said they eliminated holiday bonuses primarily due to cost (65 percent), entitlement issues (37 percent) and the development of pay-for-performance programs (28 percent). Meanwhile, of those companies that never offered a holiday bonus program, 40 percent said it was due to cost, 39 percent never considered such a program and 21 percent said that a holiday bonus program was not consistent with their reward philosophy.

Conversely, of the 37 percent of companies that will offer a holiday bonus program in 2004, nearly half (49 percent) will provide retailer gift certificates, 37 percent will award cash and 21 percent will give employees a gift of food (e.g., turkey or ham). These organizations continue to give holiday bonuses as a way to say thank you/show appreciation (54 percent), maintain tradition (24 percent) and boost morale (17 percent).

In addition, Hewitt's study found that 85 percent of companies providing holiday bonuses budgeted less than 1 percent of payroll expenses for these awards, while 9 percent budgeted between 1 and 2 percent of payroll. The monetary value of these awards varies by type. For example, companies plan to spend a median of $550 per employee on cash awards, and a median of $25 on both gift certificates and food.

While the majority of companies offering a holiday bonus will spend no more than 2 percent of payroll on these awards, were finding that organizations with variable pay programs are budgeting nearly 10 percent of payroll in 2005 for these pay-for-performance incentives,said Abosch. Theyre clearly sending a message to employees that they will be rewarded for high performance.

Holiday Parties Remain Popular

Company celebrations remain popular during the holidays, with 75 percent of organizations planning to host a party this holiday season. Of these, 21 percent will spend $5,000 or less on their parties, 34 percent will pay between $5,000 and $20,000 and 17 percent will spend from $20,000 to $30,000. The median amount a company will pay for a holiday party is $20,000.

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Director, IWS News Bureau               *
Institute for Workplace Studies *
Cornell/ILR School                      *
16 E. 34th Street, 4th Floor            *
New York, NY 10016                      *
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