Should bonuses be axed in 2020?

As recession-hit companies tighten the purse strings and let people go, is it selfish for leaders to accept bonuses?

by Orianna Rosa Royle
Last Updated: 15 Oct 2020

In the economic fallout from the coronavirus pandemic, employees face being laid off, having wages reduced or being asked to take on more responsibility for the same pay. 

Being paid a bonus is a great reward for people who have put in enormous discretionary effort and contributed to the firm's success during difficult times.

But at a high level, one person’s bonus could equate to the salary of another staff member facing redundancy. So does giving - and receiving - bonuses undermine the solidarity that will see us through this recession?

Or would cutting bonuses demotivate people even further, undermining the sense of receiving a fair reward for meeting pre-agreed targets?

We turned to leaders to ask whether they had any plans to scrap performance-related pay.

Adam Cave, managing director, Murray McIntosh 

No! Why would anyone do that? Those at the top need to take the hit on their salaries before employees across other areas of the business lose their bonuses. What’s most important here is that leaders actually lead from the front; they should always feel the pain first and feel the most pain.

The last six months has forced many businesses to adjust their headcount. It’s only fair to reward those [remaining] individuals who have worked hard by paying them bonuses. If anything, employers should probably be doing more to incentivise overperformance during these turbulent times.

Abigail Tan, CEO, St Giles Hotels

During these times, it is crucial for leadership to display unity and singularity. The obvious start for me was foregoing my salary while we remained closed. If the team suffers financially due to the pandemic, we collectively make sacrifices. I will definitely not take a bonus for 2020 or 2021. More importantly, our senior management have taken between a one to two week monthly pay cut until business improves to a profitable stage. All our employees are cutting hours and salaries. We need to be in this together, and it needs to start from the top. When we recover, those from the line and upwards who have displayed the most support will be the first to receive bonuses.

Chris Stappard, managing director, Edward Reed Recruitment

Any decision to cancel bonuses shouldn't be taken lightly. You should take the time to think about the consequences of any decision to remove financial perks typically given to those in your company. Are the bonuses paid to high-earning employees who could more easily absorb the impact of not being paid? Or are they being taken away from staff who may rely on the extra money each year? Is there a way you can balance your bonus scheme so that those who need it are prioritised?

If you cancel bonuses, it's important that you communicate clearly to your team why you have taken this decision — if you're transparent, they'll be more likely to empathise with the financial hardships that the business faces. It's worth exploring alternatives to bonus schemes that may work within your budget, such as extra time off or subsidising a personal development course.

Joel Silverman, CEO, KidsKnowBest

I'd say that the idea of bonus culture is quite dated when it comes down to people expecting a 'bonus' because of their individual performance - a bonus isn't always monetary per se. But everyone should be rewarded if the company is doing well and the team has performed to the best of their ability. Scrapping a bonus in 2020 should only be applied in the case of underperformance.

Chris Freeland, executive chairman, RAPP

If during the general uncertainty and consequential commercial pressures we’re experiencing, we’re able to sustain deserved annual salary increases to recognise consistent contribution that’s helped maintain or even grow our clients' businesses, then I will be absolutely delighted. General bonuses over the past few years have been scarce at best, so perhaps we should embrace a welcome return to an era that sees bonuses being just that – not expected, but simply a welcome genuine bonus for exceptional performance.

Image credit: Lexington Herald-Leader via Getty Images

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