Bumper year for City brings in the bonuses. The rest of us go without

Almost 20 per cent of human resources heads surveyed by Innecto, the specialist employee re- ward consultancy, say their companies will "definitely" not be awarding bonuses this year.

Most blame the general state of the economy, as well as specific issues in the industries where their organisations operate.

According to Innecto, which interviewed 183 companies across a variety of sectors, 68 per cent of those surveyed said that payouts would be less than in 2004.

"Bonuses have become increasingly important for most companies. As many organisations now pay them to all staff, they are no longer exclusive to senior management," said Deborah Rees, director of Innecto. "For instance, 88 per cent of clerical workers and 89 per cent of technical workers receive some form of bonus,"

According to official statistics, around 65 per cent of private firms provide some form of bonus scheme. This compares to 25 per cent in the public and voluntary sector.

"With the trend for companies to associate bonuses more clearly with their success, if a business has a bad year then employees are bound to be disappointed," said Ms Rees.

However, for most workers, bonus payments are only a small part of the employment jigsaw.

Ms Rees believes factors such as work flexibility, feeling valued by the employer and working for a respected company are factors that are harder to replicate and, ultimately, far more important to employees.

"Your employees get a bonus once a year, spend it and forget it. There are many other elements which companies can introduce that motivate and engage staff on a daily basis," she said.

Declining bonuses must be scary news for the high street, already suffering a significant slowdown, as many workers will have less disposable income in the run-up to Christmas, and for the January sales.

There may be an additional trough in April, as many firms pay bonuses to their staff at the end of the financial year.

But the luxury goods retailers are feeling no pain as items such as Aston Martins, jewellery and yachts are flying out of the doors. The City is booming - with investment bankers, hedge fund managers and private equity investors expecting their biggest bonus pool in almost a decade due to a frenzy of M&A activity and strong financial markets.

Showing the growing disconnection between the City and the average worker, investment bank Goldman Sachs has already put aside a £5.3bn bonus pool for its 22,000 global workforce.

For senior managers and traders, a £1m bonus is merely the base level of expectations - while the sky's the limit at hedge funds. According to head- hunters Morgan McKinley, 25 per cent of City bankers are expecting their bonus to be double what it was last year, with another 16 per cent looking for a step up of between 30 per cent and 100 per cent.