Employee bonuses and perks are becoming more commonplace in offices, as wages and salary increases lag behind pre-recession levels.
"Variable pay has become the primary mechanism to pay for performance today," according to a presentation by Ken Abosche and Marilu Malague of Aon Hewitt, a human resources consultancy. The firm's 2014 survey on payroll budgets found that 2.9 percent of budgets were devoted to payroll increases, compared to a record 12.7 percent squirreled away for variable compensation (short-term rewards and bonuses).
A whopping 91 percent of respondent companies offered a reward program, up from 78 percent in 2005 and 47 percent in 1991.
While perks were once just, well, the perk of working at a monied tech startup, more businesses seem to be dishing out benefits like gym memberships, nap rooms and flex time. Naomi Poe, founder and CEO of gluten-free flour manufacturer Better Batter, lets her employees use office equipment and services (e.g., shipping) for free and offers small bonuses for their birthdays and work anniversaries as well as generous paid vacation.
"The fact is that I, as an employer, can maximize cost savings on providing perks to a larger group of people than those people could afford to source themselves," Poe explains. "And realistically, by providing the perks, I reduce the necessity for the increase in salary."
Performance-based boosts can also be an affordable way to retain great talent; instead of boosting salaries across the board, employers are paying for productivity and results. "Automatic pay raises are rare in a fast-growth tech company like ours," says Jay Whitehead, founder and CEO of MOBLWORK, a mobile workforce services buyers' club. "Performance-based comp is the most effective way to raise your income in this environment. If you can measure results, you can improve results and earn more. Earning more based solely on time served is unsustainable. What is sustainable is [getting] continuously better and earning more based on better work results."
The trend toward variable compensation may continue for another significant reason: It's cost-effective.
"In shifting to short-term rewards," Poe says, "I maximize my ability to reward people for being productive, while minimizing my taxes, insurance premiums, etc. These backend costs to run a small business seem to increase every year at an alarming rate, and by using short-term rewards, I'm reducing these increases."
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