| |
No Longer a Staple, Bonuses Can Create a Jolly Occasion or a Blue One
12/11/05
By: David Schwab & Beth Fitzgerald, The Star-Ledger
Jeanne Achille is making a list, checking it at least twice, and essentially figuring out who is naughty or nice.
Achille isn’t Santa Claus, but to the 15 employees at her public-relations firm in Shrewsbury, she might just as well be. At the end of the month, Achille, a marketing expert who founded the Devon Group in 1994, will call her workers in one by one to the conference room and hand each a check- their year-end bonus.
Fortunately, bonuses will be the biggest since 2001 and the bursting of the technology bubble, ranging from 7 percent to 10 percent of an employee’s annual salary.
“It’s great when they are good checks, and this year we managed our business very well,” said Achille, who meets with her senior managers to figure out bonuses for each employee. “Several years ago, when there were difficult economic conditions, we still paid bonuses, but clearly they were not as robust as we would have hoped.”
“Tis the season for year-end bonuses, and employees are finding there may – or may not – be a reason to be jolly. While many will feel the joy of the season, others are getting the equivalent of a lump of coal in their stocking, experts say.
Managers and union workers alike at the former AT&T, for example, are getting healthy year-end checks, well beyond last year’s. AT&T managers – a job classification that made up two-thirds of the company’s 39,500 employees – will get bonuses equal to 183 percent of the target, which the company said is the result of AT&T’s unexpected and exemplary financial performance in 2005.
Compensation on Wall Street, much of it in the form of year-end bonuses, is expected to go up an average of 20 percent this year and many executives will see even bigger gains, the Wall Street Journal reported. Senior officials at Goldman Sachs face the blessing and curse of dividing up a staggering $11 billion bonus pool, which amounts to $500,000 and employee, according to New York magazine.
Of course, neither Goldman Sachs nor any other Wall Street firm is expected to divide the bonus pie equally to divide the bankers, who arrange mergers and stock offerings for corporations and have received a smaller percentage of the bonus pie in recent years are expected to be among the Street’s biggest winners this year, with compensation rising 20 percent to 25 percent.
For an investment banker at the level of managing director, a senior post on Wall Street, that will translate into an average pay package of between $2.2 million and $3.3 million this year. A global head of investment banking could pull in, on average, anywhere from $7 million to $10 million. Bond traders and salespeople are expected to see smaller bonuses.
Wall Street bonuses are so critical they essentially create their own economic cycle in upscale residential communities in the New York metropolitan area, such as Summit. Wall Street-types often go on new home once bonuses are paid out early next year.
“A lot of Wall Street men and women get their bonuses and come out here to look for houses,” said Susan Hunter, broker-in-charge at Lois Schneider Realtor in downtown Summit. “We get a lot of buyers in early spring.” Starter homes cost about $700,000 and the average home costs about $900,000, she said.
Montclair is a bedroom suburb of Wall Street, and Montclair Jaguar stands ready this time of year to wrap an enormous red ribbon around a holiday surprise.
Assistant Manager Paul DeBlois doesn’t always know for sure if the decision to buy a Jaguar is inspired by a hefty bonus, “but this has happened many times,” he said.
Two years ago, an $80,000 silver-blue XK8 got the red-ribbon treatment. Last year, a couple of customers played Santa with the $37,000 X model.
Travel agent Sal Castoria, owner of A Better Trip Travel in Matawan, said, “Come January, all hell breaks loose, which tells me that if someone gets a Christmas bonus, they book a vacation right away.”
Wine retailer Gary Fisch said he’s increased his inventory of fine wines by about 30 percent over last year, in anticipation of a good year.
“I have not felt this level of energy since before 9/11,” said Fisch, owner of Gary’s Wine and Marketplace stores in Bernardsville and Madison. “Among customers in the bonus category, I sense a willingness to step up to higher quality. I started to see this about a month ago, and I have to believe it is Wall Street-driven.”
But not all workers will be so lucky.
“Some companies did very well this year; a lot of companies did not,” said Paul Dorf, managing director of Compensation Resources, a consulting firm based in Upper Saddle River. “I don’t believe everybody is celebrating with champagne at the end of this year.”
For example, a study by Korn/FerryInternational, an executive recruiting firm, found 56 percent of about 900 executives responding did not expect to get a bonus this year. About one in three expect a bonus.
Another survey of 1,400 firms by Robert Half International, an accounting and financial staffing firm, found bonuses were up at about 18 percent of those responding, while 62 percent are planning to pay the same bonus as last year. About 14 percent did not offer a bonus. The survey focused on the finance and accounting departments at these firms.
Bill Coleman, senior vice president of compensation at Salary.com, a research firm based in Needham, Mass., said bonuses for 2005 appear to be “the same or better than last year.”
Many companies are paying employees more because they have had a better year. In general, corporate profits were strong this year. In addition, some companies may worry that, after several subpar years, employees may be prepared to join competitors who may have offered bonues.
Experts say the days of a simple holiday gift from the boss are long gone as more and more companies move to a “pay-for-performance” bonus.
Nearly 80 percent of U.S. companies offer such performance bonuses, up from 51 percent in 1991, according to a survey by Hewitt Associates.
Still, with bonuses either flat or down from last year at some New Jersey companies, it can be a dreary holiday season.
John Sarno, executive director of the Employers Association of New Jersey in Livingston, recently visited one company that announced there would be no bonuses this year.
“There was a lot of discussion; there was bewilderment bordering on resentment among workers,” he said. But that passed quickly.
“Most reasonable people understand that it’s tough going in the global economy,” he said.
|
|
|
