Bonus ques­tion

Bonuses are seen as cre­at­ing uncer­tainty as well as in­cen­tives, de­pend­ing on how they are used. Chris Hutch­ing re­ports.

Sunday Star-Times - - BUSINESS | NEWS -

Em­ploy­ees may wel­come bonuses – but some worker rep­re­sen­ta­tives ques­tion whether they just dis­guise poor rates of pay.

Main­freight re­cently hit the head­lines af­ter pay­ing a to­tal of more than $20 mil­lion in bonuses to em­ploy­ees in its de­pots, with­out dis­clos­ing how much each per­son re­ceived.

Last year Air New Zealand paid bonuses of $1700 to each em­ployee af­ter a bumper profit re­sult.

But the two com­pa­nies paid bonuses in dif­fer­ent ways. The air­line ba­si­cally gave em­ploy­ees a gift, while Main­freight’s bonuses were tied to per­for­mance tar­gets.

A for­mer Main­freight worker who re­signed two years ago and spoke on con­di­tion of anonymity, said that al­though he was con­tracted to work 50 hours a week, he was of­ten re­quired to work longer for less than $50,000.

One year his team reached its tar­gets but didn’t re­ceive any bonus and he was un­sure why.

In his new job he re­ceived about the same pay, which he said was too low for any fam­ily, but the hours were reg­u­lar.

First Union spokesman Jared Ab­bot said Main­freight was not high on his radar as a ‘‘bad com­pany’’ but could do much bet­ter.

‘‘They have a fam­ily cul­ture where they or­gan­ise a lot of work func­tions and trips, but peo­ple don’t au­to­mat­i­cally clock out af­ter 40 hours. They’re ex­pected to stay un­til the job is done, which can be dif­fi­cult for fam­ily life.

‘‘They’re not pay­ing the low­est or min­i­mum wages, but they don’t like unions, which is frus­trat­ing, and the bonus sys­tem is a form of con­trol. It cre­ates an im­bal­ance of power.

‘‘Bonuses can make up a sig­nif­i­cant por­tion of their work­ers’ re­mu­ner­a­tion. It cre­ates uncer­tainty. You can’t al­ways get a mort­gage when your pay is based to a large de­gree on dis­cre­tionary pay­ments.

‘‘We’d pre­fer it if peo­ple could see ex­actly what they’re get­ting and why. How many hours are they putting in to achieve per­for­mance in­cen­tive pay­ments?’’

Ab­bot said there was no col­lec­tive em­ploy­ment agree­ment at Main­freight and only about 10 union mem­bers. First Union had signed up a large num­ber but most had re­signed soon af­ter. Ab­bot be­lieved the com­pany dis­cour­aged union mem­ber­ship.

He said he had also fielded in­quiries from Euro­pean unions con­cerned about Main­freight’s at­ti­tude to unions.

‘‘All the Main­freight drivers are owner-op­er­a­tors. Other freight firms have a mix of di­rectly em­ployed and owner-op­er­a­tor truck drivers and some are mov­ing back to more di­rect em­ploy­ment for health and safety rea­sons,’’ Ab­bot said.

The em­ploy­ment con­tracts of work­ers at Main­freight were two pages, con­tain­ing main leg­isla­tive re­quire­ments over such things as hol­i­days. Last year it was one of 50 firms struck off a gov­ern­ment list of com­pa­nies al­lowed to em­ploy mi­grant labour for fail­ure to pro­vide con­tracts.

De­spite this, Main­freight founder Bruce Plested has been praised for his phi­lan­thropy and so­cial con­science af­ter speak­ing out on hous­ing and ed­u­ca­tion.

Main­freight man­ag­ing di­rec­tor Don Braid did not re­spond when asked to com­ment on the com­pany’s bonus sys­tem.

How­ever, he re­cently said his com­pany had a pol­icy of bring­ing ev­ery­one’s wage up to $60,000.

Ja­son Walker of Hays re­cruit­ment agency said bonuses were a great way to in­crease earn­ings of an in­di­vid­ual staff mem­ber by bind­ing them to fi­nan­cial per­for­mance.

‘‘The em­ployee now has skin in the game if per­sonal per­for­mance im­proves. They can be a re­ten­tion tool and el­e­vate pro­duc­tiv­ity.

‘‘The down­side is if the in­di­vid­ual’s per­for­mance im­proves sig­nif­i­cantly, but the over­all com­pany’s per­for­mance goes back­wards, what do you do then?

‘‘It pays to cal­cu­late the bonus on a com­po­nent of in­creased per­sonal con­tri­bu­tion and a com­po­nent of im­proved busi­ness per­for­mance,’’ Walker said.

Gen­er­ally, com­pa­nies paid shorter-term bonuses based on per­for­mance, an­nual bonuses for achiev­ing key ob­jec­tives, a profit share, or a ‘‘feel-good’’ bonus re­lated to com­pany per­for­mance, health and safety record, and to re­tain staff.

Walker said there was lit­tle pat­tern to the size of bonuses. They were based on the com­pany’s in­ter­pre­ta­tion of added value.

The Min­istry of Busi­ness, In­no­va­tion and Em­ploy­ment said it didn’t gather data on bonuses and nor did the Man­u­fac­tur­ers’ Net­work, or the Coun­cil of Trade Unions.

Sue Ryall of Vic­to­ria Univer­sity’s Cen­tre for Labour, Un­em­ploy­ment and Work said bonus sys­tems were most com­mon for sales staff and in bank­ing, with fewer than 2 per cent of col­lec­tive agree­ments con­tain­ing them.

‘‘We can’t col­lect data on in­di­vid­ual con­tracts for pri­vacy rea­sons,’’ Ryall said.

Karen Gre­gory Hunt of the E tu¯ union was luke­warm on bonuses.

‘‘They’re not a big fea­ture. We’d rather peo­ple were re­warded in pay rates,’’ she said.

‘‘Bonuses can make up a sig­nif­i­cant por­tion of their work­ers’ re­mu­ner­a­tion. It cre­ates uncer­tainty. You can’t al­ways get a mort­gage when your pay is based to a large de­gree on dis­cre­tionary pay­ments.’’ First Union spokesman Jared Ab­bot


Main­freight paid more than $20 mil­lion in bonuses last year but the money was linked to per­for­mance tar­gets, in con­trast to Air New Zealand pol­icy.

The founder of Main­freight, Bruce Plested, was praised last year for speak­ing out about so­cial is­sues.

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