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January 02, 2008
Survey: Cash Bonuses Remain Top Incentive
When it comes to incentives, cash bonuses are still the reward of choice for high-performing employees in the private sector. A recent WorldatWork and Vivient Consulting study showed that 80 percent of companies surveyed have at least one short-term incentive plan and nine out of 10 companies with such plans say employees receive bonuses for their hard work and high performance.

According to the study, private companies with various levels of revenue--anywhere from $100 million to more than $5 billion--stayed within 2 to 12 percent of their operating income to facilitate a short-term incentive program, with budgets that were roughly the same.

Of those respondents with short-term incentive plans, 52 percent have one plan, while the rest have two or more plans in place. Thirty-three percent of respondents said they are planning to add or modify a short-term incentive plan in 2007.

Using short term incentives such as bonuses helps focus employees and help them reach important goals says Leonard Sanicola, compensation practice leader for WorldatWork.

"This is the way to reward people and increase productivity," Sanicola says.

While short-term incentive plans are a great way to attract and retain employees, implementation of a successful plan does not come without obstacles. Sanicola warns that without clear cut standards incentive plans can turn onto entitlement plans if employees do not understand the policy, company goals, and the role they play in achieving them. Communication and a clear policy regarding short-term incentives are key.

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