SMEs embracing the bonus culture

Feb 06 2006 by Nic Paton Print This Article

Despite talk of tougher times ahead, more than half of smaller and medium sized businesses in the UK say they still pay their workers an annual bonus, according to new research.

But the study for entrepreneurs' think-tank the Tenon Forum has also found firms with more than 200 workers are more likely to give their workers a yearly boost to their pay packet.

The survey reported that 52 per cent of SMEs rewarded staff with bonuses last year.

But when it examined businesses with more than 200 workers, this figure rose to 70 per cent, compared with only half of companies that had between five and 199 employees.

Richard Kennett, chairman of the Tenon Forum, said: "It's entirely understandable that some companies pay staff an annual bonus while others don't.

"There's a whole armoury of tools businesses can use to keep their people happy and ensure business is running efficiently. Money isn't the answer to everything," he added.

Managers considering the best options when it came to rewarding staff needed to think whether a bonus would have the desired effect, he argued.

"In some sectors financial bonuses can be very motivating while in other industries alternative initiatives are often much more effective at maintaining morale and ensuring staff retention," Kennett said.

"Businesses should remember that there are a number of tax incentives and implications to giving staff bonuses and these should be considered in tandem with HR objectives," he added.

Vouchers, exchangeable for goods, are, for instance, tax exempt so long as they don't represent too generous a reward, he pointed out.

Around one in five firms that paid annual bonuses said they would be giving staff more this time than last.

A quarter of financial and business service companies said they would be increasing the amount this time round.

Manufacturing industries and financial or business services companies were the most generous, with 61 per cent and 57 per cent respectively saying they intended to pay annual bonuses to their people.

Of these, 19 and 26 per cent respectively said they would be increasing bonuses.

Workers in the transport and communications sectors were worst off, with only 35 per cent of bosses saying they would be paying bonuses.

Geographically, companies in Wales and the south west of England, as well as Scotland were planning to be particularly generous, with 26 per cent and 23 per cent respectively intending to pay more this time than last.

Businesses in London and the south east of England were less optimistic.

While more than half said they planned to pay bonuses, only 13 per cent said these would be more than last year and 23 per cent though they would be paying less.

But a study published last week suggested that many firms are wasting their time paying bonuses at all. Reward firm Innecto People Consulting found that bonus schemes do not motivate employees or improve performance, with more than six out of 10 HR directors and managers saying that their bonus scheme was ineffective.