Wednesday, October 10, 2012

Your Christmas bonus is not what it seems.

Yearly bonuses to workers are twisted into a cheep form of overtime which is only paid under certain conditions. In some cases, companies are hiding behind abstract notions of equality and fairness in order to justify paying less to their workers while the senior managers walk away with bonuses bigger than an average workers yearly salary.

To understand this complete shafting of the worker, a little history of the Christmas bonus is needed :

It's traditional to give gifts at Christmas and historically workers were given small token gifts by their employers like a turkey or some chocolate. But the practice of giving a cash bonus become common in banks and non-laboring professions by the early 20th century where white collars workers could look forward to receiving a gift of nearly 10% of their yearly income.

Although this appears generous a cash bonus is actually a very useful tool for employers because it provides a means to encourage productivity. Why pay expensive overtime throughout the year if the workers will instead accept 10% of their wages in cash at year end? Woolworth’s first cash ‘bonus’ was paid to compete with higher wages among their competitors and to avoid a strike. Famously in 1910 a 25-year-old saleswoman working in a New York department store told a National Consumers League investigator that in the week before Christmas “she worked standing over fourteen hours every day… so painful to the feet becomes the act of standing for these long periods that some of the girls forgo eating at noon in order to give themselves ..a foot-bath”.  For this overtime the store gave her $20 “presented to her, not as payment, but as a Christmas gift".

So from it’s outset the practice of paying staff Christmas bonuses was useful to avoid paying overtime and as a tool for encouraging productivity.  Even better this so called bonus would only be paid if certain conditions were met, the most common being the companies profit margin. So suddenly workers found themselves doing additional hours for which they would only receive payment if the company made a large enough profit.

But the practice soon began  to backfire on employers. Workers began viewing the cash bonus not a gift but as a right. If the company made it’s profit targets, the workers expected their cash bonus for their yearly work. In America following strike action over non-payment of bonuses, the National Labor Relations Board ruled that the Christmas bonus could no longer be considered an employer’s discretionary gift but an expected and negotiable component of a worker’s wage.

Now employers had a problem. It is reasonable to expect a company not to pay cash bonuses if the company was struggling.  Fair enough.  But employers still want to encourage extra work without paying  overtime and now workers expect the bonus as an automatic gift. The poor darlings had caught themselves in their own trap.

So what was the solution? Well instead of automatically paying bonuses to everyone, isn’t it reasonable to pay a bigger bonus to those who worked harder than everyone else? Most people would agree and so the average payment dropped. Some workers got above average, some got less, most got less on average. But how to decide which workers got what? Well, let’s allow the managers to decide.

But now we have another problem:  favoritism. Employees may feel their managers are unfairly privileging other employees with higher and undeserved bonuses. And that leads to an unhappy workforce and even legal action.

The solution is to measure a worker productivity, and this is the genius part, to set additional work targets over and on top of their regular work load AND then set their managers bonus objectives to ensure the workers meet their bonus targets ! Brilliant !

So now a worker has his manager ‘encouraging’ him to meet this ‘bonus target’ via extra hours and weekend work for which he will only receive a payment if the company makes X million instead of Y million and he will only find out if he will receive that payment at year end.

A final twist though: to prevent workers from rushing their bonus objectives at year end and producing half-assed work, the objectives are spread through out the year to ensure quality.

If you think about it, it’s pure genius. Near free overtime and of workers complain HR can hide behind fairness and equality. If workers try to opt out of the bonus scheme, their managers will miss their own  objectives so no opt out allowed. Extra work for less payment.

One Irish company for example had their employees working 37.5 hours but being paid for 35 and the 2.5 was added up at the end of the year. The employer saved on PRSI but the worker actually ends up with a lower yearly wage (for someone in this scenario earning say €10 per hour, the employer saves €500 per year and the employee gets about €50 less per year).

Therefore I call shenanigans over the Christmas bonus !

But aren't we in a recession and aren't the workers lucky to have a job? Yes and yes but it’s traditional in recessional times for the existing workforce to get increasingly shafted through less pay and more working hours. But the above outline has been happening for decades and people buy into the rhetoric of equality and fairness when it really means more overtime for less money.
Related Posts Plugin for WordPress, Blogger...