Bonus Question: Cash Rewards or Gifts? Experts Are Divided

Should employers pay their workers cash bonuses for good performance?

American Express Incentive Services of Fenton, Mo., believes that bonuses dispensed in the form of airline tickets or department store gifts inspire better results from employees than cash does.

AEIS sponsored a survey that found “most employees spend [cash] bonuses on necessities like groceries and gasoline, which have no lasting value.”

Monetary rewards fall short because they aren’t memorable, and when employers give them, their workers don’t feel “personally rewarded and proud of their efforts,” AEIS said.

Its March survey of 1,010 adults found that 29% of those who got bonuses “used their last cash rewards to pay bills” and that 18% “admitted they couldn’t remember where the money went.”

AEIS Chief Executive Darryl Hutson said an employer’s “best bet is [to give] personalized incentives and rewards.”

What the survey communicates to business is, “If you really want to reward me, don’t show me the money,” Hutson said.

But other compensation experts disagreed.

“From the perspective of my clients and myself,” said Paul Gavejian, principal of benefits consulting firm Buck Consultants of Stamford, Conn., “show me the money!”

“I will remember, and can remember, exactly how much money I received in my bonus last year and the year before,” Gavejian said with a chuckle.

“If a company switched from annual bonuses to flashy gifts, you’d hear moans of dismay from employees because you can’t pay orthodonture bills with crystal from Waterford,” said Sally Haver, vice president of human resources consulting firm Ayers Co. in New York.

“The guy who earns $100,000 a year very much counts on that extra $10,000 bonus, which is factored into the annual income because the kids have orthodonture,” Haver said.

According to Cathie Faber, president of Wellesley Group, an executive search firm in Lake Zurich, Ill., cash bonuses are “going up dramatically and are more popular today than ever.”

“Typically, years ago cash bonuses were reserved for only the most senior people,” Faber said. “Today, we’re seeing them at the mid-professional level, all to help attract and keep people on the job.”

At PTI/EMI Inc., a firm in Woodbridge, N.J., that manages 38,000 employees for 1,800 companies, Marketing Director David Flook said paying cash bonuses to employees “tripled our number of client referrals. With absolute certainty, cash works.”

Although PTI/EMI pays to send its top sales staffers on Caribbean holidays, “we would not agree that the trips are as powerful as the cash bonuses,” Flook said.

Business consultant Robert Leston, chief executive of Psychological Associates Inc. in St. Louis, said, “You can make a case either way [for giving a cash or a gift bonus], but probably money gives people more freedom to do what they want to do with it. Giving them options, like a fur coat or a TV set, is more restrictive.”

But Leston added, “I think having a person be able to receive cash or gift is the best of all possible worlds.”

Alan Schoenberg, board chairman of Cleveland-based search firm Management Recruiters International, said that for senior executives, cash bonuses are both critical and memorable. If an executive earning a base salary of $600,000 gets a $300,000 cash bonus, “I can guarantee you he remembered all that and it didn’t go for necessities.”

However, “everyday Joes” earning between $50,000 and $100,000 would be “overwhelmingly” better off with a paid vacation than with a $5,000 cash bonus, he said.

Schoenberg said that after a paid vacation, an employee could tell a co-worker, “You know the boss sent Maria and me to Italy for 10 days? It was like a second honeymoon.” It’s a bonding “that would not have occurred and one that I feel is so valuable. It’s the way I run my company.”

Sherwood Ross is a freelance writer who covers workplace topics for Reuters. You can reach him at sherwood@mato.com.