Contractual bonus payments threaten jobs


A HUMAN resources consultancy firm has warned of job losses after the bulk of companies that paid bonuses last year did so because it was contractual.


In a Who Paid Bonus in 2016 Survey report, the Industrial Psychology Consultants (IPC) said more than half (65,9%) of companies surveyed paid annual bonuses.

Of those that paid annual bonuses, 39% paid because it was contractual, while 29,3% did so because their companies were performing well.

The report showed that 29,3% of the participants said there was no particular reason for paying bonuses in 2016 and 9,8% said it is part of the National Employment Council (NEC) collective bargaining agreement, which makes it contractual.

These results show that a considerable number of companies are still paying bonuses that are not performance-related.

“The main reason for paying bonuses, even if companies are not doing well, is, bonus payments to employees are contractual through individual contracts or through NEC collective bargaining agreements,” IPC.

“This practice is likely to put more pressure on companies to reduce costs, as the majority of them are already highly leveraged. This is likely to lead to further head count reductions in 2017 in order to contain costs.”

IPC said the government, labour and employers have to be candid with “themselves and acknowledge that businesses are in are tight fix, therefore, bonuses, especially those with no relationship to performance, are a luxury in the current environment”.

“We urge businesses to adopt self-funding incentive schemes in place of guaranteed bonuses currently operating on the market,” IPC said.

“Overall, companies must, at industry level, renegotiate NEC collective bargaining agreements and individual employee contracts to align them with current economic realities. NEC collective bargaining agreements and most individual employee contracts do not support business sustainability.”

IPC’s call for a performance linked bonus comes as the government is struggling to pay the 13th cheque for civil servants, who equate it to entitlement when revenue inflows to Treasury coffers are diminishing.