Are you receiving a bonus this year? Or will you be left out in the cold when the cheques are handed out in January?

According to a national survey of 506 mid- and large-sized organizations, the practice of giving out bonuses is commonplace. Typically, this bonus is paid annually when a business unit or company meets its financial objectives.

In the private sector, more than nine in 10 companies surveyed by international HR consulting firm The Hay Group say they offer these short-term incentives.

“It’s very prevalent,” says Dave Payne, regional director of Hay Group’s Calgary office.

Mike Dempster, Business Edge
Dave Payne, regional director of Hay Group, says workers can expect good wage hikes this year.

The Hay Group released its annual survey results in September. The survey asked organizations about their plans for the next 12 months with regard to base salary increases. The information released to the public includes variable and executive pay trends gleaned from other Hay data sources.

Overall, workers nationally can expect an average base salary hike of 3.1 per cent based on the figures supplied in the June/July survey. The hike includes cost-of-living adjustments and merit pay that people receive as part of their base salary.

In Alberta, the average increase is expected to be 3.6 per cent, tops in Canada. B.C. will lag most regions with a 2.6-per-cent base salary hike.

Payne says the findings are consistent with reports released by other consulting services, and should be an accurate indicator for 2005, barring unforeseen economic disasters.

“Overall, people should be expecting a pretty good increase this year,” Payne says. “And bonus plans are likely to pay out pretty close to target, in general.”

While most headlines highlight the annual base salary hike, Payne says it’s the short-term incentives that interest many workers.

“As an employee, if I get a three- or four-per-cent increase to my base, I pay attention. But frankly, most employees pay more attention to their short-term incentives because that could represent 15-20 per cent of base pay.

“That’s what organizations are trying to encourage, to get you to pay attention to the variable pay and achieve the objectives attached to it.”

In the Hay Group survey, respondents included 315 industrial organizations, 112 financial groups and 133 organizations in the broader public sector.

Concerning the firms offering short-term incentives, most employees share the wealth.

Ninety-two per cent of the industrial organizations surveyed said they offered short-term incentives, with bonuses going to 100 per cent of senior management and 51 per cent of the lowest-paid employees, such as secretaries and administrative staff.

The survey showed that 51 per cent of the broader public sector offered short-term incentives. The sector includes municipalities, post-secondary schools, hospitals and other organizations that are government-owned or controlled.

The Hay Group says that other survey data also show organizations offer long-term incentives, such as stock options, that pay out over four or five years.

In the industrial sector, 45 per cent offer long-term incentives; 43 per cent do so in the financial sector. Of course, the broader public sector doesn’t have that ability.

Those employees being rewarded with long-term incentives normally sit at the CEO and senior management levels. In the industrial sector, 100 per cent of those at the top salary level ($175,000 and above) received incentives while only five per cent of the lowest-paid personnel ($25,000 to $35,000) were included.

The survey also detailed a CEO’s reliance on short- and long-term incentives. Hay’s figures show that a CEO in the energy industry in 2003 received 22 per cent of his or her compensation in base salary, 24 per cent in short-term incentives and 54 per cent in long-term incentives.

The figures are similar in other industry sectors. A CEO in the telecommunications sector received compensation of 20 per cent base salary, 20 per cent short-term incentive and 59 per cent long-term incentive.

“It’s clear there’s lots riding in the long term for these folks,” Payne says.

On a general note, the survey appears to be a harbinger of good things to come for Canadian employees in 2005.

Of the 506 companies surveyed, 83 per cent said they were planning to increase the base salary of their employees. Seven per cent said they were freezing salaries and 10 per cent were undecided.

More than three-quarters of the companies said they will build merit pay into the base salary structure, based on individual performance. (This contrasts with short-term incentives, which tend to measure a business unit’s and company’s ability to meet financial and other targets.)

In the cases where companies “differentiate” between the competencies of employees, superior performers receive twice the merit pay of those who just meet the acceptable standard, Payne says.

“Companies want to keep their star performers,” he says. “So they pay them more.”

* Note: For a full summary, see www.haygroup.ca.

(Mike Dempster can be reached at miked@businessedge.ca)