Public or private, there are too many bonuses
Now that Britain’s new prime minister is cracking down on public-sector bonuses, let’s hope the private sector follows. Payments that were meant to be for exceptional performance are now handed out for ordinary and even below-average accomplishments.
Civil servants and National Health Service employees have become used to receiving bonuses for doing no more than what they are already paid for. But the same misuse of bonuses applies in wide swathes of commerce too: it is not only investment bankers who expect to receive bonuses every year, but banks’ counter tellers and staff in back-offices.
Nor is it only profligate Greece that paid its workforce an extra month’s salary at Christmas and Easter: the 13th month pay cheque has become common in many companies in the UK.
David Cameron promises to crackdown on a system in which three-quarters of civil servants boost their regular pay with a bonus. The PM wants to cut that to 25 per cent – though why there should be any fixed quota should be questioned.
The bonus culture is common in many government departments, from health to defence. The MoD last year paid bonuses to 50,000 of its 85,000 bureaucrats – which means these are not payments for the best but for the majority, including employees with a below-average performance. And as the ministry has been making similar annual sums every year for the past seven years, these are not exceptional payments.
Public-sector bonuses are paid not to workers who outperform colleagues but to everyone who beats targets – targets set by other civil servants.
But large parts of the private sector are paying bonuses to staff that beat undemanding internally-set targets. Junior staff are given bonuses as a cover for the larger payments given to senior staff and to make junior employees feel more managerial. Performance barely figures in payment.
And companies like bonuses because they by-pass other add-on employment costs such as pensions and are theoretically temporary and discretionary – though increasingly they are negotiated with staff associations and are such an expected part of pay that they cannot be withdrawn.
But an annual bonus is as nonsensical as a guaranteed bonus. Cameron must be ruthless in eliminating public-sector bonuses for all but the most exceptional bureaucrats – it is the only practical way to cut civil-service pay without cutting job numbers. But the private sector should take this as a lead and end its own bonus culture too.
