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Would you cut your base salary to potentially earn more in a performance-related bonus?
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Investing in your success
18 March 2015
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9 minute read
Australians are more risk-averse than our New Zealand neighbours when it comes to our salary package, with a new Hays survey showing that 59 per cent of Aussies would take a base salary cut for the opportunity to potentially earn more through performance-based bonuses, compared to 68 per cent of New Zealanders.
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In an online poll of 1,510 people, our survey found that 46 per cent of Australians would take a base salary cut of up to 20 per cent in order to receive a bonus based on their performance. A further 13 per cent would take a cut of more than 20 per cent for that same opportunity.
The final 41 per cent would prefer not to roll the dice and would not cut their base salary in order to potentially earn more through a bonus based on performance.
Interestingly, it seems New Zealanders are more secure in their belief that their performance could earn them more dollars. The same poll was run in New Zealand, where 60 per cent of respondents said they would take a base salary cut of up to 20 per cent in order to receive a bonus based on their performance.
A further 8 per cent would be willing to take a base salary cut above that level.
Just 32 per cent of New Zealanders, compared to 41 per cent of Australians, were not willing to take a base salary cut for the chance to earn more in a performance-based bonus, suggesting that we are more risk-averse than our Kiwi neighbours.
Understanding how people weight the various elements in a compensation package can be a great attraction and retention advantage. After all, a compensation package consists of more than just salary.
However, there is no one-size-fits-all approach to compensation packages and employers should work with a candidate and their recruiter to tailor an offer that has the best chance of retaining them long-term. This is especially important for employers in industries or sectors where certain skills are in short supply.
Performance-related bonuses offer advantages both to employers and employees. A performance-related bonus rewards employees for good performance and can be very motivating for employees since they have a vested interest in achieving a top result. For employers, this can motivate their team to work at peak efficiency.
Such bonuses work best when both the employer and employee are aware of the objectives that need to be met in order to qualify for the bonus, which is why they are often tied to performance appraisals.
The minimum performance expectations must be made clear, however, otherwise an employee may not feel they are being rewarded fairly for their performance. Communication is essential to make sure both sides are fully aware of the objectives that need to be met in order for performance-related bonuses to be awarded.
The poll was conducted on hays.com.au and hays.net.nz in January and February 2015.
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