British workers jealous and resentful of bonuses

Just over one-third of finance professionals believe bonuses given to top earners are unjustified, reports The Telegraph.

Only workers in the United Arab Emirates are more hostile to bonuses, out of the 14 countries examined in the report.

The study also found that 62 per cent of finance workers believe unjustified bonuses cause resentment in the office, souring the atmosphere at work.

The strongest anti-bonuses sentiment is found in the north east of England, where 97 per cent of those surveyed resent the payment of rewards to colleagues who they feel are not deserving.

Bonuses are most disliked if they are perceived to boost short-term thinking among executives, and when critics believe the awards encourage workers to focus on one small area of their job rather than the overall picture.

“Perceptions of ‘unjustified’ bonuses, whether stemming from ineffective incentive designs or not, can trigger resentment and undermine employee engagement and motivation. This hurts performance, exacerbates myopia and corrodes culture,” said professor of accounting and financial management Wim A Van der Stede.

“Designing effective incentive systems is hard, yet incentives that may be fair may not look fair – a challenge that touches on the issue of transparency as well as the question of both how and how much to incentivise.”

CIMA suggests that bonuses should be more explicitly linked to long-term performance and the business’s ultimate goals, rather than short-term metrics such as revenue.

“Boards need to think carefully about their bonus structure and this applies to all levels within the business. Current schemes often only focus on ‘hard indicators’ such as short-term revenue, but they should also seek to reward evidence the employee is helping the organisation plan and build for the long term,” said Mr Van der Stede.

“As a bare minimum, they need to ensure incentives are rooted in a firm understanding of the business model and are aligned to long-term business success.”

In banks, EU rules have clamped down on bonuses, limiting the payouts to the same level as salaries, unless shareholders agree for the cap to kick in at twice the level as salaries.

British regulators dislike the rule, however, arguing that in some finance firms bonuses are a useful method of varying pay in line with performance, allowing bonuses to rise in good years but also slashing companies’ costs in bad years.