Historically, bonus payments have been rare in the housing sector, says Karl Ellis. But they are becoming more common, as a recent salary survey of the sector shows.
According to a salary survey by Remuneration Economics, in the year to July 2007, 20% of housing association staff received a bonus, compared with 63% of workers across all sectors. There are also significant differences in the size of bonuses. Workers in the housing sector received an average bonus of 5% of salary, while the typical bonus paid in the UK overall was almost three times this at 13% (Figure 1). Bonuses in housing are also less prevalent and lower than in the public sector and charities overall.
Are Bonuses Essential?
There is a reluctant, yet growing, acceptance that bonuses are necessary to attract the best talent, particularly at executive level, where pay levels are well below their private sector equivalents. Indeed, the survey reveals that while only one in five chief executives in the sector receives a bonus, the figure is almost 90% across all industries. Chief executives' bonuses average 56% of salary across the board, but in housing associations they are just 5%. This reflects the nature of the sector and its regulatory environment, and the pattern is followed at director level in general (Figure 2).
Careful Construction Required
Bonus schemes need to be carefully constructed to drive behaviour that contributes to the organisation's objectives, as there are concerns that bonus schemes can distract senior executives from their goals. However, given the low size of bonuses on offer in the sector, is a chief executive going to be motivated by the possibility of receiving a relatively small bonus of say £5,000, when so many are already driven by the cause of providing a social service?
Bonuses To All Staff?
A small number of housing associations have been tempted to offer bonuses to all staff. But if the available bonus pot is allocated to all employees based on organisation-wide targets, it is unlikely to cultivate high performance and may be quickly taken for granted. These schemes tend to be rather blunt instruments that provide relatively low bonus levels, which are unlikely to influence individual performance. However, if they are effectively designed, communicated and understood then their cultural effect could be more significant than their cost.
Bonus schemes have been in place for many years in the private sector and lessons can be learnt from their experience. For example, strong performance management processes need to be in place to make individual bonus schemes workable, and to ensure that bonuses are targeted towards staff displaying desired behaviour and high performance.
Innovative Payment Methods
Perhaps bonuses are most needed in housing associations where there is a high demand for quality staff in areas that cross over into the private sector. Property development and maintenance is one such area, where bonuses average 15% – three times more than in the rest of the housing sector. This area is also innovative in the way that staff are paid, with some associations using commission payments to pay for quality on delivery of work rather than up front in basic pay.
Bonuses Are Not The Be All And End All
Finally, it must be stressed that pay and bonuses are just two of the key elements of the 'total reward' package. While housing associations will always struggle to compete with the private sector for staff in these areas, they increasingly have the edge in other areas such as job security, job satisfaction, flexible working arrangements and competitive pension arrangements.
Fig 1: Comparison Of Bonus Occurrence And Levels In The Housing Sector With All Sectors
Fig 2: Typical Directors' Bonuses Across Sectors
Source: Remuneration Economics National Salary Survey 2007 and Remuneration Economics Housing Association Survey 2007
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