Would you cut your base salary for performance-related bonuses?

Article Extracted from IBO 2015.03.03

A survey conducted by recruitment firm Hays has revealed that more than half of all Australian workers would take a base salary cut for the opportunity to earn more through performance-based bonuses.

Fifty-nine per cent of people surveyed by the recruiter said they would be willing to take a drop in guaranteed money, compared with 68% of New Zealanders.


Hays also found that 46% of Australians would take a base salary cut of up to 20% in order to access performance-related bonuses with 13% saying they would take over 20% in base salary reductions.

“Understanding how people weight the various elements in a compensation package can be a great attraction and retention advantage,” says Nick Deligiannis, Managing Director of Hays in Australia and New Zealand.

“After all, a compensation package consists of more than just salary."

Deligiannis noted that this type of salary structure is important to remember when hiring new staff and it also plays into the hands of employers in the insurance industry currently facing a major talent shortage.

“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," Deligiannis said.

“This is especially important for employers in industries or sectors where certain skills are in short supply.

“A performance-related bonus rewards employees for good performance and can be very motivating for employees as they have a vested interest in achieving a top result."

For employers, this can motivate their team to work at peak efficiency.

Deligiannis warned that clarity within a bonus structure is all important for a performance-related salary, as employees need to know where they stand and what targets to meet in order to make this wage structure worthwhile.

“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 though, 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.”