43% of Employers Do Not Award Year-End Bonuses

In an era of tighter cost controls, the tradition of the year-end bonus or gift may be fading, at least beyond the confines of Wall Street. Roughly 43 percent of human resources executives in a new survey said their companies do not award year-end bonuses, perks or gifts to employees. That is up from 2007, when a similar survey found that 28 percent of companies never award year-end bonuses.

The survey released Wednesday by global outplacement consultancy Challenger, Gray & Christmas, Inc. found that among the 53 percent of companies that do award bonuses, half give employees either a non-monetary gift or a nominal monetary award valued at less than $100. The results of the non-scientific survey were based on approximately 100 responses to an e-mail poll distributed in November.

Of the remainder awarding some type of year-end bonus, 31 percent give all employees a monetary bonus based on the company’s overall performance, while 19 percent give bonuses only to selected employees based on the individual’s performance.

“There could be several reasons for the shift away from year-end bonuses. Certainly, the economic conditions of the last four years have contributed. In addition, some companies may have found that year-end bonuses are not the morale booster they once were and that there are more effective ways to reward high performers, while increasing the morale and loyalty of all employees. In many companies, year-round efforts may have replaced the end-of-the-year gesture,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

For the employers that continue to award monetary bonuses, three out of four indicated that the size of this year’s bonus will be about the same as in 2010, according to the Challenger survey. Only 17 percent of respondents said their companies were planning to increase the size of bonuses. About eight percent said this year’s bonus will be lower than a year ago.

“A lot has been reported about the large number of companies that are flush with cash. It is important to understand that these are mostly large public companies, most of who are among the Fortune 500. The vast majority of employers are small, most with fewer than 100 workers on their payrolls. Many of these companies do not have the funds to award extravagant year-end bonuses,” said Challenger.

Indeed, the latest available statistics from the United States Census Bureau show that of the 6.0 million employer firms counted in 2007, 5.9 million had less than 100 employees. Furthermore, of the nearly six million firms in the U.S. in 2007, 4.6 million or more than three-quarters had sales receipts totaling less than $1,000,000.

“After payroll, insurance costs, equipment and supplies, etc., the vast majority of employers probably do not have much left over to throw into a bonus pool,” said Challenger.

“That being said, most employers understand that workers want to be recognized for their contribution to the company. It doesn’t have to be a Wall Street sized bonus check. Many workers would be happy with a $25 gift certificate to a local restaurant or store. Many would probably be happy with an extra day or two of paid vacation at the end of the year. Many are simply happy to have a job in this economy,” said Challenger.

The one area of the economy that will probably never abandon the year-end bonus is Wall Street. The year-end bonus typically makes up a larger part of these workers’ annual pay and that is a system which is unlikely to change, as it is a risk-based business that requires risk-based pay. According to a compensation survey by consulting firm Johnson Associates, Inc., Wall Street bonuses are expected to shrink by 20 percent to 30 percent this year. That still means that the average managing director will take home about $900,000 in year-end bonus money, down from $1.2 million a year ago.