It’s Year-End Bonus Time – Again!

By: Paul R. Dorf, APD, CRI

Upper Saddle River, NJ – February 8, 2012 – We are now into the first quarter of the New Year, and as companies are closing out their financial books, many of them are also calculating their 2011 bonuses.  As most HR and financial people are aware, by making the payments before March 15, their companies will still get the tax deduction for last year.

The following are nine (9) questions that you should address, the answers to which may help to make the entire process more effective and worthwhile:

  1. Does the company’s actual performance warrant paying out any bonuses?
  1. Has your company adequately funded this plan, and is it able to pay bonuses without financial harm to the company?
  1. Are the performance goals used to justify the bonus or incentive plan consistent with your annual Business Plan and Long-Term Strategy?
  1. Are there any situations such as potential bankruptcy, financial meltdown, significant lawsuits, suspension of certification, or regulatory review that suggest delaying or deferring bonus payments?
  1. Should business head be paid bonuses if the overall company performance is lackluster?  Conversely, should they share in good company results even when their business unit’s performance is below standards?
  1. Do all employees understand the tie-in between their efforts, the company’s performance and their awards?
  1. Is the bonus/incentive plan too complex?  Is it hard to explain and understand, difficult to administer, and questionable as to why employees are receiving any awards?
  1. Are the bonus amounts sufficient so that employees are willing to make the extra effort?  Conversely, are the awards out of proportion with the effort and results?
  1. What potential harm will come if the employee’s expectations about increases and bonuses are not met?  But before you answer this question, are those the employees you really want to worry about and keep?


We will address some of the common answers and their implications in our next press release.