New developments in bonus scheme design

Bonus or incentive plans increasingly incorporate a wide range of performance factors such as attendance, customer service, quality, safety, team and individual performance or various HR-related measures - in addition to the traditional output or profit measures. That is one of the main conclusions to emerge from an in-depth study of company practice by Incomes Data Services.

Growth of multi-factor, multi-level schemes

IDS found that a growing number of organisations are introducing multi-factor, multi-level schemes. These allow the company to operate targets for specific jobs, teams or departments alongside site-level or company-wide elements. As IDS explains: "Local targets can be set over which employees can exert significant influence, while at the same time a link can be maintained to the performance of the organisation as a whole."

"Increasingly, companies are seeking to establish more dynamic arrangements that allow them to alter or add factors each year in line with changing business objectives."

What you will find in this issue of IDS Study

This 43-page report features a wide variety of stand-alone bonus and incentive plans, typically those designed to cover the largest number of employees in an organisation.

IDS examines trends in bonus scheme design and includes examples of work-measured plans, profit-related schemes, attendance bonuses, customer service schemes, gainsharing and multi-factor bonus plans.

The report comes in two main parts:

Analysis - bonus schemes in operation

Looks at the key features of the bonus schemes operated by the 30 organisations featured by IDS:

considers the operating level of these schemes
the factors that are chosen and the corresponding targets
distribution and frequency of bonus payments
importance of employee communications.

Company practice

Details of how bonus schemes work in practice at 30 named organisations from both the manufacturing and service sectors. Each of the company entries includes the following information:

type of scheme
brief background
main objectives
factors upon which the scheme is based
performance targets
hurdles that may have to be crossed before any payments are made
distribution and level of payments
how progress against the targets is communicated to employees
brief evaluation of the impact of the scheme.

Want to know more?

Title: "Bonus schemes", IDS Study, January 2003.

Availability: Contact customer services at Incomes Data Services in London, tel: 020 7324 2599, or email sales@incomesdata.co.uk.

Examples of recent issues of IDS Study can be found at www.incomesdata.co.uk/studies/studies.htm

Incomes Data Services is an independent research organisation providing information and analysis on pay and conditions, pensions, employment law and personnel policy and practice in the UK and the rest of Europe. For more information about IDS, jump to www.incomesdata.co.uk

Posted 1 May 2003