Corporate Bonuses in the Age of COVID-19

We recently received a question from a Chief Operating Officer that I’m sure will resonate this year with sales leaders and executives on corporate bonuses.

“Do you have any thoughts around what people are doing on their corporate bonus plans given Covid and any adjustments or changes that they’re making?”

Many companies have announced that there will be no corporate bonuses this year. That seems to be a recurring theme. Fortunately, we’re finding that when this is handled well, there’s not much negative feedback.

Considering the world’s unprecedented experience with COVID-19, many employees have been expecting something like this to happen, and it’s palatable particularly in light of continuing layoffs. (Many companies that we talk with have had more than one round of layoffs. Some have had up to three rounds!)

Use a standard of fairness

It’s critical for bonus elimination to be thought out and managed well. A standard of fairness is key to success and ensuring your best people will be there with you in the good times as well as difficult times like many companies are facing today. This always starts at the top. Ask yourself how you are treating the C-Level executives at the same time you are asking the organization to forego their bonus this year. Once you have that figured out, provide visibility into how the C-Level and the top executives are being treated. In nearly every case where we have heard about grumblings and negative feedback, there has been the appearance that leadership wasn’t in it with the team. That’s just not good. Some companies have decided to have salary cuts at the highest level and/or elimination of bonuses. Whatever you decide, it really is a good practice to communicate it with your company. If you don’t, many will assume you are doing nothing. It’s great PR for your executive team, and the organization will understand that you are all part of the solution.

Communicate with empathy

Communicate with empathy and clarity. My recommendation is to deal with this as soon as you can. Don’t wait until November, but do it now. This gives people an opportunity to plan. And be sure to let them know that as the ship is righted in 2021, you will make things right by them. If you’re eliminating bonuses, explain it in the context of what you’re doing to save jobs while managing your overall costs of doing business relative to revenue.

Cut out or cut back?

I haven’t heard as much about companies cutting back on bonuses as I have about eliminating them. Reducing bonuses won’t be seen much differently from cutting them out, particularly in situations where the sums are not that large relative to overall pay. And of course if you pay out too much, you won’t realize the expected benefit to the organization.

If you can afford to pay out 50% of the bonus, it will probably be perceived as a win. Again, be clear and upfront about your reason for the change.

I recommend that your messaging should be that everyone is in this together. Be transparent in your communications about what you’re doing at the executive and at the C-level. Let people know that you’re planning for a recovery in 2021, which you expect to be a great year — and that you’re all about saving jobs!

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