17 March 2018
Some Chinese companies use bonus payment as a publicity stunt to draw attention. Photo: China Daily
Some Chinese companies use bonus payment as a publicity stunt to draw attention. Photo: China Daily

China year-end bonuses: Reading the tea leaves

China’s macro data has painted an encouraging picture of the economy in recent months, but what about the situation at the micro level? I believe the annual year-end bonus payments offer an interesting insight.

Mainland companies have started to pay bonus before the Lunar New Year holiday. In the past, media reports tended to focus on some exorbitantly high bonus figures. However, the focus now has shifted to cases involving super-low bonus levels.

Some firms paid nothing, some paid a few cents. Some companies offered lucky draw in replacement of a proper bonus. These outliers have attracted lot of media coverage.

Bonus payment is one of the essential tools for corporates to attract and retain talents.

For many Chinese workers, the year-end bonus is a key motivation and one they look forward to every year.

Bonus payments are decisions made by individual companies. Management would normally take into account the efforts and performances of different employees, as well as overall team performance, earnings profile of the company, industry outlook and even broad economic conditions.

Generally speaking, foreign-owned and state-owned companies are relatively more disciplined than private firms in handing out bonus.

In particular, state-owned enterprises usually determine the bonus based on individual performance and how senior the staff is.

Listed companies, not surprisingly, link the year-end bonus to earnings results. By contrast, some small and medium firms and startups follow a more random pattern, and the bonus level is often up to the personal decision of the business owner.

It’s said that employees working for foreign companies are usually most satisfied with their year-end bonuses, followed by those working for joint ventures, while those employed by private firms are the least satisfied.

Given the importance of the bonus as part of the overall reward package, a company should draft a clear and predictable bonus policy, so that employees know what to expect.

Some companies have developed bad practices in this area which they should rectify. Activities that need to be curbed include paying more to executives who are related to the boss or have close ties with him, and using bonus payment as a publicity stunt to draw attention.

This article appeared in the Hong Kong Economic Journal on Jan. 23

Translation by Julie Zhu

[Chinese version 中文版]

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Senior investment banker

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