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Performance-Based Bonuses - 2/26/16

Let’s say your employer tells you that you will be receiving a bonus.  That feels good, not just because of the money, but also because it’s an indication that your job performance is simply excellent.  Or is it? 

More than a quarter of the one hundred and twenty employers surveyed by the human relations consulting firm Willis Towers Watson indicate that they supply performance-based bonuses to employees who fail to meet expectations.  As reported by Bloomberg, the survey also uncovered rampant grade inflation for performance reviews. 

Most managers rate underperforming workers as either meeting or exceeding expectations.  Here’s the issue.  For many salaried employees, bonuses have turned into an expected addition to their income rather than a reward for performance. 

That sort of mentality renders bonuses sort of useless as a motivational tool.  So it’s no surprise that only twenty percent of employers participating in the survey say that merit pay results in higher levels of individual performance.  It also means that top performers are being rewarded at roughly the same level as underachievers.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.