New Zealand Leads the Way in Incentive-Based Pay

Media Release 18 January 2007

New Zealand Leads the Way in Incentive-Based Pay

New Zealand employers are leading the way in incentive-based pay for finance professionals.

That’s one of the major findings of an international survey by global recruitment firm Robert Half International. In the survey of more than 2500 finance professionals across 13 countries, New Zealand was first equal with Ireland for the proportion of employees receiving a bonus - at 55%.

This figure backed up this year’s Auckland Salary Survey by Robert Half Finance & Accounting, which revealed that 53% of Auckland’s finance professionals received a bonus as part of their remuneration package.

Even better, in the international survey, 30% of New Zealand employees, the highest rate for any country, reported that their bonus was paid on a fixed basis, based on a formula.

“What is so encouraging about this figure is it reveals that after years of being criticised for not making enough use of incentive-based pay, New Zealand’s finance employers have now ‘got it’,” says Kim Smith, Senior Consultant for Robert Half Finance & Accounting.

“Paying bonuses on a fixed basis, using a formula, means the system is transparent and employers and employees know precisely what employees have to achieve to qualify,” she says.

“Such systems are less open to favouritism and employees are more likely to buy in to them, seeing them as a fair way of rewarding achievement.”

However, worryingly, 19% of New Zealand employees said their bonus was flexible, based on subjective judgement.

“Employers might think this gives them the ability to reward stand-out performers in areas that might otherwise go unacknowledged, but in reality subjective bonus systems can lower morale and create staff divisions,” she says. “Employees who don’t receive a bonus, or receive only a small bonus, will believe that they have been treated unfairly and are likely either to put in less effort, or even start hunting for another job.”

Kim Smith says this might be one reason why she is seeing more job applicants who don’t want a bonus, but want all their remuneration fixed in a salary. Some are even prepared to take a salary that is significantly lower than their potential earnings under a combined salary/bonus system.

“These applicants have probably experienced bonuses based on subjective judgement in previous jobs, and felt they were treated unfairly. Rather than run that income lottery again, they want to know precisely what they will be earning.”

The good news from the Robert Half Auckland Salary Survey was that finance professionals rated their bonus as the most important tangible employment benefit they received.

“Employers who want to retain and motivate staff know that financial reward for good performance, applied fairly to all employees, is a powerful incentive,” says Kim Smith

“But it has to be done properly - handing out financial rewards based on subjective judgement can do more harm that good.

“When a fair, transparent, formula-based bonus system is implemented it can be a strong staff motivation and retention tool. It’s great to see that so many New Zealand employers have recognised that and are doing something about it.”

ENDS

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