Posted on: Wednesday, December 22, 2004

Bonus payout differs by employer

By joyce M. Rosenberg
Associated Press

NEW YORK — One of the hardest issues small-business owners face at this time of the year involves employee bonuses — whether to give them, and how much to give.

Every company owner has his or her own philosophy about bonuses. If it's been a difficult year, many owners may decide to forgo bonuses. Others believe employees need to be rewarded for hard work regardless of whether profits are up or down.

While many reserve bonuses for year-end, others give them quarterly or pay out as employees reach certain goals.

"We give them a bonus because we think it will encourage superior performance," said John Bliss, president of Bliss, Gouverneur & Associates, a New York public relations firm. Moreover, he said, "many companies in our line of work pay bonuses, so it's partly to be competitive and retain good people."

Ronn Torossian, president of 5W Public Relations in New York, said, "People are obviously motivated by cash." He uses bonuses "to thank people for working hard during the year and to push people to work hard during the coming year."

Some owners are confused by the difference between a bonus and a cash gift. A bonus usually is based on performance — the company's, the employee's, or both. A gift generally has no conditions attached to it.

The policy at Bliss' firm allows for employees to earn up to 10 percent of their annual pay as a bonus. The money is paid out two ways:

At the end of each quarter, if the company has reached its revenue goals for that period, employees get 5 percent of their quarterly compensation. If a goal isn't met, there's no bonus for anyone. At year's end, regardless of goals, employees get 5 percent of their annual pay.

There are also what Bliss called spot bonuses, given for individual achievements during the course of the year.

Many company owners start thinking about bonuses as Dec. 31 draws near. And many, concerned with estimated tax payments and other cash-flow demands, might fear that the business can't afford them. One way to ensure that you're not deciding yes or no at year's end is to plan for bonuses well in advance.

The owners of FCF Schmidt Public Relations and its affiliate, Ferrare & Fleming Advertising, allocate money for bonuses as they put the annual budgets together.

"We treat our desire to give bonuses as important as paying the electric bill," said Paul Fleming, president of Ferrare & Fleming. "Even if it's a bad year, it's still in the budget."

Fleming said the two Plymouth Meeting, Pa., companies give employees two bonuses a year.