Area GEICO Employees Land Big Bonus Profit Sharing Perks Is 27.6 Percent
GEICO employees had something to cheer about when they got their bonus checks this week.
By: Cathy Jett, The Free Lance-Star
Despite an increase in claims payments due to damage from Hurricanes Katrina and Rita last year, the fast-growing car-insurance company turned an “exceptional” profit, according to its 2005 third-quarter report.
And it shared the wealth yesterday by giving employees who’d worked for the company a year or longer a 27.6 percent profit-sharing bonus. That’s the equivalent of about an extra 3½ months pay, although 10 percent was automatically deposited in a 401(k) plan.
“I’m gonna pay off a few small bills, pay for a cruise, get some new bedroom furniture, and put the rest in savings,” one employee wrote on FredTalk, an online chat room hosted by fredericks burg.com.
Yesterday’s profit-sharing bonus was the third-highest GEICO has given employees, including those at its Stafford County office, over the past decade. Employees received a 32.2 percent bonus in 1998 and a 28.4 percent bonus the following year, according to company’s Web site, geico .com. Calls to the GEICO office in Stafford County were not returned.
Bonuses dropped to 8.8 percent in 2000 and 4 percent in 2001, however, which helped bring the bonus average from 1995 to 2004 to 18.4 percent.
That’s still more than twice the average profit-sharing bonus in the insurance industry, which is 9 percent of employees’ paychecks, said Joseph Kilmartin, director of compensation for Needham, Mass.-based salary.com.
“The GEICO payment is very, very large. There’ll be parties this week,” he predicted. “Everyone will be very happy, especially car dealers.”
Companies are increasingly starting to offer some form of variable compensation, including profit sharing, because they aren’t set increases that repeat year after year, Kilmartin said.
“For the last 10 years, companies have been very concerned about increasing their fixed costs,” he said. “This gives them a chance to switch some of their otherwise fixed costs to a variable-costs model. The result is that if they have a bad year, they don’t have to pay anything [in bonuses].”
Bonuses also can help boost morale and increase applications for employment. But the flip side is that some companies may offer lower salaries than their competitors, then advertise bonuses, said Paul Dorf, managing director of Compensation Resources Inc., a compensation consulting firm in Upper Saddle River, N.J.
Employees can get turned off if bonuses don’t materialize or are smaller than expected, he said.