Fewer Bosses Are Presenting Their Employees With Year-End Bonuses : Pay: The trend is to substitute incentive-based plans for the traditional automatic check.

L.A. Times Archives

Dec. 14, 1989 12 AM PT

From Times Staff and Wire Services

Performance-based considerations are increasingly taking the place of year-end bonuses as employers across the United States decide who’s been naughty or nice at holiday time.

Although a boss who substitutes an incentive program for the traditional holiday bonus risks being called a Scrooge, the trend actually reflects the Santa Claus principle of rewarding good--i.e., productive, behavior--says consultant Paul Muller.

“Bonuses, like salary, are no longer being treated as an entitlement,” said Muller, director of Midwest compensation consulting for Ernst & Young, a New York-based consulting firm.

And Orange County employers are no exception. An informal survey this week of many of the county’s largest employers--and also of some of the smaller ones--finds that holiday bonuses here are most likely to be in the shape of turkeys or in the form of a week off with pay. The Christmas check still exists, but it is rare.

By and large, the county is in line with the rest of the nation in not giving employees something simply because it’s the holiday season.

“In effect, management now is saying, ‘To the extent that you help us be successful, we’ll help you be successful,’ ” Muller said Wednesday in a telephone interview from his Chicago office.

The move away from holiday bonuses is part of a trend toward fewer benefits in general for employees and retirees, especially in health insurance, often in light of lower corporate profits.

Muller said the elimination of year-end bonuses is motivated more by management’s desire to increase productivity than to cut costs.

But some Orange County firms are bucking the trend.

Beckman Instruments of Fullerton, for example, is one of the few large companies in the United States in which each of its domestic employees receives a cash bonus not tied to a profit-sharing or incentive plans. Company founder Arnold O. Beckman “has always considered the company and its employees a family,” said Elke Eastman, a spokeswoman for the company, which has 6,000 employees in the United States.

The dGWB advertising agency in Irvine will be handing out “substantial” cash bonuses, said partner Jim deYong, who describes it as “a Christmas tradition.” The 30 employees there “all work hard, so we try to share our appreciation with them in the way it will be most appreciated,” deYong said.

But many--if not most--Orange County firms are are skipping yuletide gift-giving altogether. Knott’s Berry Farm, for one, has no holiday bonuses, although it puts on a Christmas party for employees and their families. “We have a profit-sharing program that’s unrelated to Christmas,” said spokesman Stuart A. Zanville, “but we close on Christmas Day so employees can spend the day with their families.”

While U.S. employers are becoming less generous with bonuses, their Japanese counterparts are becoming more so. Japanese companies ordinarily pay bonuses twice a year, in summer and before the new year.

Winter bonuses at 291 Japanese companies averaged $4,870 this year, up 7.3% over last year, the biggest increase in nine years, the Japanese Federation of Employers Assn. said Wednesday.

An association official in Tokyo attributed the increase to the prosperity of business in that country.

Compensation experts in the United States said the traditional year-end bonus in this country typically represents 5% to 6% of annual pay for hourly workers and 10% to 15% for middle managers and executives.

Muller had no statistics to support his contention that year-end bonuses are disappearing, but other experts say a trend toward incentive-based compensation is apparent.

“There is a great deal of increase in the use of variable pay . . . tied to some performance measures,” said Frank Belmonte, a compensation consultant with Hewitt Associates in Lincolnshire, Ill.

Bob Kurisu of Strategic Compensation Associates in Los Angeles said Christmas bonuses are “kind of an anachronism” and are rarely found in large corporations.

However, at companies where year-end bonuses have been traditional, Belmonte said, workers often expect them and management may feel obliged to hand them out even if the company has not had a particularly good year.

“When you consider eliminating it, it’s not an easy thing to do,” he said. “It’s a very emotional issue.”

Therefore, he said, employers planning to replace the year-end bonus with an incentive-based program should give employees plenty of notice and clearly spell out which goals must be met to qualify for incentive pay.

“Don’t eliminate it and say nothing,” Belmonte said. “Eliminate it and do a lot of communication and explanation.”

Times staff writers Luz Villarreal and Mary Ann Galante contributed to this story.

HOLIDAY BONUSES AT LARGEST COUNTY COMPANIES

Here is a list of some of the biggest employers in Orange County and their bonus/gift plans for the holiday season):

Rank Company, City (County Employees): Monetary or Other Bonus

1. McDonnell Douglas Corp., Huntington Beach (8,000): gift certificate

2. Pacific Bell, Orange (5,975): team incentive awards are given after first year to employees who meet goals for their departments.

3. Alpha Beta Co., La Habra (5,000): store gift certificate

4. Lucky Stores Co., Buena Park (n/a): $10 to $20 store gift certificate

5. Parker-Hannifin Corp., Irvine (4,000): turkey

6. ITT Canon, Santa Ana (2,000): $10 gift certificates, company jackets, candy

7. Beatrice/Hunt-Wesson Inc., Fullerton (n/a): turkey gift certificates