Bonus Outlook Bleak in 2002

December 21, 2001 ( Two-fifths of companies expect to make significant reductions in the bonuses they pay to their executives in 2002, a Towers Perrin study finds.

According to the group’s Pulse Survey,

  • just under a third of the companies are cutting the overall level of executive bonuses by more than 25%, compared 2000 bonus figures,
  • one out of ten will pay no bonuses at all, and
  • a little over 40% plan to pay within plus or minus 25% of what they paid last year

In fact, companies cutting 2002 merit budgets have done so by an average of 0.6% to 3.7%, or below the 4% level cited in earlier Towers Perrin studies

Findings also show that 25% of the sample is considering changing the design of their bonus plans. The same percentage is cutting top management salaries and 15% has done the same for exempt and nonexempt employee populations.

The survey found the largest cutbacks to be in the following sectors:

  • high-tech,
  • entertainment and media,
  • financial services,
  • metal manufacturing, and
  • professional services businesses.

Industries doing better economically, including health services, petroleum and pharmaceuticals, have seen less or no change, according to Towers Perrin.

Towers Perrin’s annual Compensation Data Bank (CDB) comprised input from 350 companies.