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August 29, 2006
Bonuses More Popular Among Employers

While base-pay increases remain modest, employers are increasingly relying on bonuses for attracting, motivating, and retaining talent, according to a survey by Hewitt Associates.

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Eighty percent of respondents to Hewitt's survey of 1,028 large organizations offer at least one type of broad-based variable pay plan, up from 51 percent in 1991. 

Sixty-three percent of respondents offer special recognition awards, which acknowledge individual or group achievements with small cash awards or merchandise.

Sixty-two percent of respondents offer business incentives, the same percentage of companies that said they offer signing bonuses. Forty-four percent of the companies offer individual performance awards, the same percentage of companies that said they offer non-executive equity awards. Thirty-five percent of companies said they offer retention bonuses.

"In today's competitive global economy, companies are unwilling to increase costs to their bottom line; therefore, they are relying more on variable pay to help motivate employees and help them cope with growing economic pressures," says Ken Abosch of Hewitt Associates.  "Variable pay programs allow companies to manage fixed costs, create focus on key business objectives, motivate and reward employees with bonuses when performance goals are attained.  The bottom line is that variable pay is a smarter way to manage a business in a good or bad economy."

The survey found that respondents forecast that spending on variable pay as a percentage of payroll will be 11.0 percent in 2007.

Hewitt's survey found that executive employees can expect base salary increases of 3.8 percent next year, compared with 3.7 percent for salaried exempt employees, 3.6 percent for salaried nonexempt employees and non-union hourly employees, and 3.3 percent for union employees.

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