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Employers Increasingly Favor Performance-Linked Bonuses

Employers are making employees work harder for their money.

Most workers will receive modest raises this year and next, as employers reward employees with performance-linked bonuses rather than broad salary increases, according to a survey by consulting company Hewitt Associates Inc. to be released today.

The economy and labor market are relatively strong, but employers are loath to increase fixed costs with raises. Hewitt predicts raises for nonexecutive white-collar workers — the largest chunk of the work force — will average 3.7% next year, slightly ahead of 3.6% increases this year and last. Raises remain below dot-com-boom levels, when they clocked in at 4% or higher between 1997 and 2001.

Those figures exclude bonuses, increasingly used by managers to retain and motivate employees, according to Hewitt and other pay consultants. Employers are making more workers eligible for bonuses and have increased the share of their payroll devoted to variable pay in the past few years. The strategy parallels employers’ efforts to vary raises based on employees’ performance; bonuses have the advantage of not being permanent.

By Erin White

From The Wall Street Journal Online

Full Story: http://www.careerjournal.com/columnists/theorypractice/20060829-theorypractice.html?cjcontent=mail

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