Bonus abuse is the manipulation of bonus programs to get a bonus without having to earn it. People can do it by fraudulently claiming bonus offers, or it can be done through clever gaming of bonus rules.
Bonus abuse explained
Bonus abuse is the act of an employer paying a bonus to employees that will not be paid out until after their employment has ended. Bonus abuse often happens when it doesn’t seem like there are any other ways for the company to avoid firing people or cutting hours, and they want to keep skilled workers on staff without having them work full time.
Bonus abuse can also happen if companies rely too heavily on one worker who may get injured, which makes them necessary for a short period but then unavailable indefinitely once healed.
This practice isn’t exclusive to businesses in bad shape; it just seems more likely that these kinds of bonuses would happen as a last resort rather than another type of bonus.
Many companies have bonus plans in place with vesting periods, which means that the employee must be employed for a set period before they are eligible to receive their bonus at all.
Others do not require any type of employment commitment beforehand and will give employees bonuses regardless of how long they lasted on staff; this is seen as an act of desperation or generosity by many people overseeing these bonus programs.
Why do people abuse bonuses?
Bonus abuse is the act of abusing bonuses given to you by your employer. A bonus abuse can be defined as using a bonus for personal gain, in which employees will do things such as risking turning over all their bonuses to support gambling or other risky pastimes.
Some people use it as free money and spend more than they should on pleasures that are not needed, while others believe it’s an opportunity to make up for what hasn’t been earned through wages.
Employers may resort to bonus payouts because companies need extra incentives beyond just salary increases. Higher salaries have become less effective at motivating workers due to stagnating wage growth rates since the 1970s. Employing this tactic may also provide flexibility when attempting motivation during economic downturns.
Bonus abuse in many cases is caused because employees are not properly trained on how to handle bonus money, or they receive the bonus unexpectedly and don’t have a plan for it.
In some instances, companies will include a clause that clarifies the bonus cannot be used as payment during times of unemployment, which can sometimes lead people to blow all their bonuses at once before getting laid off.
When calculating social security contributions, there may also be confusion about what type of compensation constitutes taxable income versus one’s earnings from wages.
Here are some tips to avoid bonus abuse:
- create and enforce company policies related to bonus misuse. You can also have employees sign agreements disallowing them from using bonuses inappropriately or with any other intent than the one you decide on at the time of the award. This policy should be in place before awarding bonuses if possible, but it’s never too late post-award as long as the worker signs no agreement.
- use a bonus pool system that allocates money based on performance instead of giving out individual bonuses so that they won’t feel entitled
- if you give out individual bonuses. Make sure people know how to use bonus money responsibly. This way, they won’t feel entitled to the bonus and will keep their bonuses safe
- avoid giving out discretionary bonuses that are not tied to performance or some other objective criteria
- if you do give out bonus pools, it’s important for employees to know how much of the pool is allocated for them, so they don’t take more than they deserve–this could lead to feeling entitled towards a bonus and misusing this bonus. If someone does ask about their allocation on an individual basis, be sure to explain what factors in addition to rank/performance go into deciding who gets certain amounts from the pool (e.g., seniority)
The cost of bonus abuse for companies can
The cost varies depending on the company’s bonus plan, but bonus abuse is most costly when a bonus was not awarded.
Bonus plans typically are set up with several steps that employees need to complete to receive their bonus at its maximum value, and they can include such requirements as meeting goals or hours worked during the year. If an employee doesn’t meet these criteria, then there will be no bonus payout at all. `
In addition to this loss of productivity due to incomplete tasks, other costs associated with bonus abuse may arise from disgruntled or unemployed former employees who cannot collect their bonuses because they did not complete required tasks before leaving the organization; legal fees if corrective action needs to be taken against offenders; and reduced morale for the employees who were not bonus-rewarded.
Although bonus abuse is typically a problem in large organisations, small to mid-size companies with less of an established bonus policy can also experience issues related to bonus abuse if they don’t have clear expectations about how bonuses will be awarded and distributed.
How to identify a victim of bonus abuse
In bonus abuse, the abuser takes advantage of bonuses given to employees. This is often done by increasing their workload and taking on additional projects they don’t have time or ability to complete. They also will not inform management about a bonus that they are eligible for to disappear into thin air without notice. The victim may find themselves working all hours of the day with no rest, only to be told there was never any bonus in the first place because they were being embezzled from them!
The key signifier here is an increase in workload at peak times when you’re already overworked; if you’ve been receiving poor performance reviews lately but your boss wants more out of you, then look closer.
If management is unresponsive or dismissive to your bonus abuse claims, then you may be able to file a claim with HR before they get too far in the process.
You can always speak up and ask for feedback on how well you’ve been doing at work; if someone has taken it upon themselves to make sure that bonus never gets processed, then this might be where those negative reviews are coming from!