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NEARLY 45 percent of local companies have confirmed that they will pay out annual bonuses this year, a new study by Industrial Psychology Consultants (IPC) shows.

This is against a figure of 36,2 percent that said they will not be paying, while 18,8 percent said they “were not sure.”

The IPC study shows that the number of companies that are likely to pay a bonus has actually decreased by 4,5 percent compared to last year’s figure of 49,4 percent

The research also noted that the trend of paying bonuses that are not performance related in Zimbabwe seems to be continuing.

“This could be a historical anomaly resulting from contractual obligations that give employees a right to a guaranteed 13th cheque regardless of the performance of the company,” said IPC.

Of the firms surveyed, 31,8 percent said their bonus payments this year were performance related, while 34,7 percent said it is a guaranteed bonus with no link to either company or individual performance.

There was a 4,6 percent decrease in respondents who said that their bonus is a performance bonus (36,6 percent in 2014 compared to 31,8 percent this year).

IPC managing consultant Memory Nguwi said the issue of paying non-performance related bonuses was unsustainable in the long-run.

“Those that are paying a guaranteed 13th cheque attributed this to either their sector collective bargaining agreements or contractual obligations.

This is not sustainable. We’re likely to see companies struggle to pay these bonuses due to the current performance of the economy. We believe that paying a performance bonus is more sustainable,” said Nguwi.

“There must be clear rules with regards to when the company can declare a bonus. The performance bonus scheme should also take into consideration other performance measures besides profitability for the following reason: Profitability does not always reflect the status of the company.

“To avoid burning yourself, the bottom line criterion should always be the “money in the bank.

Profits can be manipulated by vigorous cost cutting that increase returns in the short term but at the expense of the company’s viability in the long term.

“Profitability may be highly variable because of seasonal or economic factors that are entirely outside the control of management. Some companies’ profit is subject to fluctuations that have nothing to do with their own operations.”— BH24.