2008 BONUSES – THE DANGER OF OUTDATED ASSUMPTIONS

It could be argued there are only 3 types of distribution structure at present:
• Those that have recently restructured.
• Those that are currently restructuring.
• Those that are about to restructure.

The impact of KPIs is only part of the story when it comes to the probable changes in sales rewards for life companies in the coming months.   Many bonus schemes have been ineffective as motivators in 2008.  Often based on assumptions at half year in 2007, no companies could have foreseen the situation they would find themselves facing in 2008. “The amount of guaranteed lump sums and soft bonuses will not be repeated in 2009 and companies must get the bonus structure right if they are to keep top people in the coming months.  The demand for top wealth consultants remains strong, people want to retain those staff, but can't afford to do that at the cost of overpaying.  At the end of January many people will be deciding whether to stay or move.  We are already advising a number of clients on the best remuneration mix to ensure they keep top performers with competitive, but not financially crippling reward packages.”

RESTRUCTURES

The major upheavals faced by the wider economy have obviously had a major impact on the life companies and how they are approaching their business.  Nowhere is this more evident than in the timing of a number of restructures. 

Traditionally undertaken at half year and hopefully completed by the last quarter so the team are ready to face the new financial year, a number of restructures are still yet to occur.  Delaying restructures until this late in the year can have caused even more uncertainty and pressure on people, including those who will benefit from changes.  “The delays we are seeing from companies looking to restructure is resulting in enquiries from people who we would normally expect to be totally secure in their positions and reluctant to move,” said Alison French, Head of Research at Paul Harper. “Any possible bonuses could be affected by the uncertainty of changes early in the new financial year, which means people are considering moving to a scheme and role they can be confident will exist in 2009, unlike the situation with their current employer.  The current situation, coupled with the rise in KPIs, is definitely muddying the water for people already unsettled by the current market conditions. ”

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