Changing times for bonus schemes - QCG

VARIABLE PAY

Changing times for bonus schemes - QCG

A recent survey conducted by QCG highlights a number of key shifts in how organisations approach annual bonus and long-term incentive schemes. Vicki Badham, Head of Reward at QCG and the author of the report, said: “These changes are firmly grounded in the need to ensure that performance-related reward is linked to business strategy and performance, and also crucially that any schemes in place are helping to keep employees engaged and motivated.”

%ADVERT%

Key survey findings

The highlights of the survey, which were supplemented with the key conclusions from QCG’s Reward Leaders Forum, a group of senior reward professionals, are that:

• Over two-thirds of private sector organisations have recently made changes to their annual bonus schemes, while just under two-thirds of public sector organisations expect to make changes.
• These changes are mainly focused on changing the performance measures for executives and senior managers but also include extending eligibility for annual bonuses more broadly.
• Indeed, the survey showed that over two-thirds of professional/managerial and operational/clerical employees are eligible for bonuses in both private and public organisations.
• Recent or expected changes to the design of long-term incentive plans are less common, but where changes were reported, they were mainly focused on restricting grants to executives and senior managers only.
• Additionally, survey participants reported a preference to moving away from stock options towards restricted stock or performance shares.
• Deferrals of annual bonus schemes are gaining ground, reflecting the decreased prevalence of long-term incentive grants being made to levels below executives and senior managers. These deferrals are most typically made in shares or a combination of shares and cash in private sector organisations and in cash for public sector organisations.
• The role of line managers in working collaboratively with the reward function in delivering difficult messages on annual bonus and long-term incentives has "really come under the spotlight". Badham said: “This presents a key challenge for reward professionals in terms of educating and supporting managers.”

A final word

“By getting the link right between reward and performance, a real incentive is given to employees to strive to become high performers. Therefore, at a time when it is really important for employees to be motivated and engaged to perform highly, it is just as important that the design of annual bonuses and long-term plans act as real incentives to support business growth. For this reason getting performance-related reward right is currently more critical than ever, and is now guiding the priorities of many reward professionals.” - Vicki Badham, Head of Reward, QCG.

Want to know more?

Title: QCG’s Performance-Related Reward Survey, April 2012.

Survey details: Conducted by QCG for its Reward Leaders Forum, the survey is based on responses from 50 organisations, 75% of which were private sector organisations and 25% were in the public sector. These results were supplemented with the conclusions from QCG’s Reward Leaders Forum.

Availability: The full survey results are only available to survey participants, but a summary is available by contacting Vicki Badham at QCG, email: vicki@qcg.co.uk.

QCG is a “medium-sized business effectiveness and HR consultancy focused on helping organisations to improve and sustain long-term performance.” To find out more visit www.qcg.co.uk.