Although pay-for-performance rewards for top achievers and signing bonuses to attract talent account for most of the one-shots, they also include companywide amenities and targeted perks, like lunches out with the boss or Visa gift cards
Yacht-sized bonuses for Wall Street big shots and employee-of-the-month plaques for supermarket standouts are nothing new, but companies' continued efforts to keep costs down have pushed employers to increasingly turn to one-off bonuses and non-monetary rewards at the expense of annual pay raises.
"There is a quiet revolution in compensation," said Ken Abosch, a partner at Aon Hewitt, a global human resources company. "There are not many things in the world of compensation that are all that radical, but this is a drastic shift."
According to Aon Hewitt's annual survey on salaried employees' compensation, the share of payroll budgets devoted to straight salary increases sank to a low of 1.8 per cent in the depths of the recession. It dropped to 4.3 per cent in 2001, from a high of 10 per cent in 1981. It has rebounded modestly since the recession, but still only rose 2.9 per cent in 2014, the survey of 1,064 organisations found. (These figures are not adjusted for inflation.)
Aon Hewitt did not even start tracking short-term rewards and bonuses - known as variable compensation - until 1988, when they accounted for an average of 3.9 per cent of payrolls. Ten years later, that share had more than doubled to 8 per cent. Last year, it hit a record 12.7 per cent.
Of course, companies have long rewarded top executives and rainmakers with bountiful bonuses - and that continues to be true - but compensation experts say the prevalence and types of one-time rewards and perks have spread further down the ranks than ever before. Although pay-for-performance rewards for top achievers and signing bonuses to attract talent account for most of the one-shots, they also include companywide amenities and targeted perks, like lunches out with the boss or Visa gift cards.
"It affects the CEO all the way down to the guy who sweeps the factory floor," Abosch said. Ninety-one per cent of the companies surveyed have at least one broad-based reward programme, up from 78 per cent in 2005 and 47 per cent in 1991.
Perhaps more surprisingly, the trend now extends to sectors like higher education and agriculture, as well as to the government, which historically resist performance-based rewards because they often rely on subjective judgments.
With the economic recovery nearing its sixth anniversary, stubbornly sluggish wage growth has become a central issue, eroding people's faith in the American dream, shaping the economic messages of potential presidential candidates and weighing on the Federal Reserve Bank's decision of whether to raise interest rates from their near-zero levels.
Over the past 12 months, real average hourly earnings have increased by just 2.2 per cent. Since 1979, most of the gains in pay have gone to those at the top of the salary pyramid while, except for brief periods in the 1980s and late 1990s, those in the middle and at the bottom have been losing ground.
Several developments help account for wage stagnation. The economy's globalised and technological nature, which has placed more bargaining power in the hands of employers, and long periods of relatively high unemployment - compounded by waves of layoffs and excessive numbers of discouraged and underemployed workers, leaving some employees fearful to ask for more.
The shift in compensation that favours one-shot-only rewards over incremental increases in salary that compound over time also appears to be playing a significant role.
"This is something that has not gotten as much attention in conversation about flat wages," said Linda Barrington, executive director of the Institute for Compensation Studies in the Industrial and Labor Relations School at Cornell University.
The shift to short-term rewards took off after the economy went into a nose-dive in 2001, she said. "Then in the Great Recession, it really skyrocketed," she said. "It's really hard to cut wages and salaries, so the more compensation you can give in other forms, the more nimble you can be in a recession."
Some experts expect the trend to continue even as the unemployment rate drops and the labor market tightens.
Employers like one-shots precisely because they are temporary. They save money over the long run because they don't lock in raises, giving managers greater control over budgets, particularly during downturns.
"It's so much easier to not give a bonus than to cut someone's pay," Barrington said.
At Squaremouth, a software company in St Petersburg, Florida, most employees received an annual raise of 0.8 per cent for 2015, just enough to match last year's rise in consumer prices. But staff members have been treated to other sweeteners like new Apple Watches - preordered with choice of size and colour - a $200 "beer" bonus, birthdays off and the installation of a "hangover couch" for midday snoozes.
©2015 The New York Times News Service
Yacht-sized bonuses for Wall Street big shots and employee-of-the-month plaques for supermarket standouts are nothing new, but companies' continued efforts to keep costs down have pushed employers to increasingly turn to one-off bonuses and non-monetary rewards at the expense of annual pay raises.
"There is a quiet revolution in compensation," said Ken Abosch, a partner at Aon Hewitt, a global human resources company. "There are not many things in the world of compensation that are all that radical, but this is a drastic shift."
According to Aon Hewitt's annual survey on salaried employees' compensation, the share of payroll budgets devoted to straight salary increases sank to a low of 1.8 per cent in the depths of the recession. It dropped to 4.3 per cent in 2001, from a high of 10 per cent in 1981. It has rebounded modestly since the recession, but still only rose 2.9 per cent in 2014, the survey of 1,064 organisations found. (These figures are not adjusted for inflation.)
Aon Hewitt did not even start tracking short-term rewards and bonuses - known as variable compensation - until 1988, when they accounted for an average of 3.9 per cent of payrolls. Ten years later, that share had more than doubled to 8 per cent. Last year, it hit a record 12.7 per cent.
Of course, companies have long rewarded top executives and rainmakers with bountiful bonuses - and that continues to be true - but compensation experts say the prevalence and types of one-time rewards and perks have spread further down the ranks than ever before. Although pay-for-performance rewards for top achievers and signing bonuses to attract talent account for most of the one-shots, they also include companywide amenities and targeted perks, like lunches out with the boss or Visa gift cards.
"It affects the CEO all the way down to the guy who sweeps the factory floor," Abosch said. Ninety-one per cent of the companies surveyed have at least one broad-based reward programme, up from 78 per cent in 2005 and 47 per cent in 1991.
Perhaps more surprisingly, the trend now extends to sectors like higher education and agriculture, as well as to the government, which historically resist performance-based rewards because they often rely on subjective judgments.
With the economic recovery nearing its sixth anniversary, stubbornly sluggish wage growth has become a central issue, eroding people's faith in the American dream, shaping the economic messages of potential presidential candidates and weighing on the Federal Reserve Bank's decision of whether to raise interest rates from their near-zero levels.
Over the past 12 months, real average hourly earnings have increased by just 2.2 per cent. Since 1979, most of the gains in pay have gone to those at the top of the salary pyramid while, except for brief periods in the 1980s and late 1990s, those in the middle and at the bottom have been losing ground.
Several developments help account for wage stagnation. The economy's globalised and technological nature, which has placed more bargaining power in the hands of employers, and long periods of relatively high unemployment - compounded by waves of layoffs and excessive numbers of discouraged and underemployed workers, leaving some employees fearful to ask for more.
The shift in compensation that favours one-shot-only rewards over incremental increases in salary that compound over time also appears to be playing a significant role.
"This is something that has not gotten as much attention in conversation about flat wages," said Linda Barrington, executive director of the Institute for Compensation Studies in the Industrial and Labor Relations School at Cornell University.
The shift to short-term rewards took off after the economy went into a nose-dive in 2001, she said. "Then in the Great Recession, it really skyrocketed," she said. "It's really hard to cut wages and salaries, so the more compensation you can give in other forms, the more nimble you can be in a recession."
Some experts expect the trend to continue even as the unemployment rate drops and the labor market tightens.
Employers like one-shots precisely because they are temporary. They save money over the long run because they don't lock in raises, giving managers greater control over budgets, particularly during downturns.
"It's so much easier to not give a bonus than to cut someone's pay," Barrington said.
At Squaremouth, a software company in St Petersburg, Florida, most employees received an annual raise of 0.8 per cent for 2015, just enough to match last year's rise in consumer prices. But staff members have been treated to other sweeteners like new Apple Watches - preordered with choice of size and colour - a $200 "beer" bonus, birthdays off and the installation of a "hangover couch" for midday snoozes.
©2015 The New York Times News Service