Bonus schemes failure forces base salaries up

Company bonus schemes designed to encourage and reward high performance are failing to deliver the goods.

A survey of top employers in the UK has revealed many bonus schemes are not reaching their business targets.

The survey, by human resource and employee benefits consultants William M Mercer, showed bonus schemes commonly miss target levels by 25 per cent and that base pay is drifting upwards.

Its findings also revealed that the administration of pay and bonus schemes is often fragmented and hampered by inadequate investment in pay pro- cesses and systems support.

The survey of 58 major UK employers identified the policies, systems and processes used for pay and bonus schemes.

Mark Edelsten, European partner at William M Mercer, commented, “What we are seeing is a failure to control the base pay and bonus mix, resulting in low bonus pay-out and an upward drift of base pay.

“The overall result is to blur the high performance message that many leading companies seek to emphasise and to alter the balance of risk and reward between employer and employees. Meanwhile the presence of base pay drift stores up problems for the future.”

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