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Surge in bonuses at top of UK firms

Chris Blackhurst
Sunday 13 December 1992 00:02 GMT
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MORE companies have switched to bonus schemes as a way of rewarding their executives during the recession.

A new survey from P-E International, the management consulting and business services group, to be published this week, shows that 87 per cent of large companies now use bonus schemes to reward their executives. According to Clive Hewitt, the report's author, a few years ago the figure would have been less than 50 per cent.

The highest bonus in his survey of public and private companies in London and the South- east with an average turnover of pounds 470m (including 38 with an average turnover of pounds 1.8bn), was a chief executive, whom he refused to identify, receiving an additional 150 per cent of salary. For directors, the average bonus was 29 per cent of salary; senior executives looked forward to earning an extra 26 per cent and middle managers, 21 per cent.

Companies were awarding bonuses instead of increasing salaries because 'a lot of people have left organisations which has meant a greater workload for existing managers'. Management layers and numbers have been reduced, requiring those who remain to work harder. Companies have had to find a way of rewarding them without upsetting pay differentials.

A bonus, Mr Hewitt said, also had the merit of being performance-related.

Of the companies using schemes, 96 per cent covered directors and 88 per cent included senior executives. Barely more than half awarded annual bonuses to middle managers.

The reasons given for having a bonus scheme, in descending order of popularity, were: achieve better corporate results; motivate achievement; focus effort on key areas; attract and keep key executives; share in company prosperity; sharpen commercial awareness; link employment costs to results and build team spirit. Almost 70 per cent said the scheme met its hoped-for objectives.

Most schemes set three targets for the executive - overall results, and divisional and departmental performance - with all three having to be met to receive the maximum possible.

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