Bonuses depend on structures

Media reports about the issuing of bonuses to executives of top corporations, even within those businesses that have posted less than impressive results or to be in financial difficulty, is an example of why this misunderstanding does exist. Whilst a subject of constant speculation, the truth about bonuses is that there are different kinds of structures, related policies and dynamics involved.

For the most part bonuses are dependent on performance and in the case of a perpetual bonus system, for example, can form part of the broader staff recruitment and retention strategy. They may be included in a service contract as an incentive-based structure with specific deliverables. "As an example, an employee is offered a bonus of ten thousand Rand based on specific targets or deliverables such as generating more revenue, or improving operational efficiency. This could be given in specific stages within the calendar year," says Teryl Schroenn, CEO at Accsys.

Contribution is rewarded

According to Schroenn bonuses are primarily given to acknowledge and recognise the contribution made by employees towards a goal or several goals of a business. People are often rewarded for the contribution they have made in addressing particular issues and steadying a business through turbulent market conditions. It has to be remembered, however, that there are also sign-up bonuses that kick-in, irrespective of how the business is progressing.

These are contractual and, rightly or wrongly, are automatically applicable. There are also bonuses based on improving the situation, even if the company remains in the red. "But, white knights and silver bullets are rare in business. It is unusual to hear of anyone being able to enter into a company and almost immediately turn things around. It takes time. So whether or not the amounts of these bonuses and the reasons behind their approval are justified, it is important to remember that bonuses should be aligned to either performance or success in business or both," Schroenn concludes.