The traditional guaranteed 13th cheque used as an employment benefit for senior management and other employees is still alive and used throughout many organisations in South Africa in addition to performance bonuses. This is supported by data from the recent REMchannel online survey where 72% of the general staff category employees which represents in excess of 500,000 employees reported that they receive a guaranteed bonus 13th cheque as a benefit.
“This means that employees do not have to meet any performance conditions to receive the guaranteed bonus,” says René Richter, PwC Partner responsible for managing the Research Division of Human Resources Services.
Translating this to rand and cents, it costs South African employers in the REMchannel survey about R5bn to pay these employees a guaranteed cheque. It is interesting to note that in the same category of staff, 63% of the incumbents also receive a short term incentive or performance bonus. At managerial level the survey shows that 29% of respondents receive a 13th guaranteed cheque, whilst 76% received a performance bonus in the past 12 months. At executive levels the opposite trends are reported – 16% of executives received a guaranteed 13th cheque, whilst 80% received performance bonuses.
“It is important to understand that the prevalence of paying a 13th cheque is not the norm across industry sectors. There is no requirement in the South African labour laws for companies to pay bonuses of any sort. It is a contractual matter or company policy, usually based on historical practices,” says Richter.
In the pharmaceutical and chemical industries, 83% of respondents received a guaranteed 13th cheque. In the construction and engineering sectors 63% of incumbents received a 13th cheque, followed by 30% of incumbents in the financial services sector.
Performance bonuses or short term incentives are defined as a form of additional compensation paid to an employee or department as a reward for achieving specific goals or hitting predetermined targets. A performance bonus is compensation beyond normal wages and it is typically awarded after performance appraisal and analysis of projects completed by the employee over a specific period of time.
“What we do know is that employees tend to rise to a standard set for them. The more you expect the more they will achieve but it is important to maintain the balance which will energise the organisation and will set the framework for greater achievement and performance,” adds Richter.
For performance targets to be meaningful and effective in motivating employees it must be linked to the overall organisation’s strategy. Employees who don’t understand their roles in the organisation’s success are more likely to become disengaged.
“What is critical to sustainability is to make sure that employees think and act like owners. Employees who understand their contribution to the sustainability and the growth of the organisation will feel empowered to act and make the right choices,” concludes Richter.