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