Performance based bonuses replace entitlement 13th cheques at Executive and Senior Management levels

The traditional guaranteed 13th cheque is being phased out as an employment benefit for senior management among South African companies, according to a report issued by Professional Services Firm PwC today.

René Richter, Associate Director of PwC, says: “Companies are replacing the traditional 13th cheque with performance-based bonuses.  Executive and Senior Management can expect companies to start reviewing bonus payments with the focus on performance, particularly now that the market is coming out of the global economic recession.” There has been a growing trend over a number of years for companies to consolidate the 13th cheque benefit into the Total Package, specifically at the more senior levels.

Richter points out that some industries, such as the financial services sector, the performance focus is greater than others, and can expect marginal salary increases, which will be inflation related.  This is evident from the increases granted in the past 12 months where financial services sector and the health sector granted the lowest average increases for all categories of staff.

Actual Average Total Package increments by Industry Sector
1 October 2010 to 31 October 2012
National All Industries Financial Services Mining Telecommunications Health Higher Education Petro-chemical
  7.9 9.3 7.7 6.7 9.2 10.4

The 2011 PwC South African Employee Benefits Guide is based on the data submitted by 51 companies across a broad spectrum of industries. The research was carried out between August and September 2011.

Only 29 (57%) of the companies that took part in the study reported that they provide a guaranteed bonus or 13th cheque as a benefit to all categories of employees. In the fast moving consumer goods and manufacturing industries; parastatal and tertiary institutions the prevalence of a 13th cheque was the highest.  Only 50% in the chemical, pharmaceutical, petrochemical, mining and quarrying industries said they provided a 13th cheque to employees.

The information technology (IT) and telecommunications sectors reported that they did not give employees a guaranteed end-of-the-year bonus.
Richter says: “The 13th traditional cheque has become antiquated in the workplace. Instead, employers are increasingly focusing on measuring the performance of senior management.” Further, there is no requirement in the South African labour laws for companies to pay bonuses of any sort, she says. “It is a contractual matter or company policy, normally based on historical practices.”

Where a 13th cheque is provided as a benefit, the majority (72%) of respondents the annual guaranteed bonus is an add-on benefit, while 28% reported that the bonus is a package allocation within a total package structure.

Furthermore, 23% of respondents indicated that the benefit was calculated as 8,33% of their salary.