Bonus payouts are expected to be roughly flat year-over-year, weighed down in part by a second quarter laden with natural disasters. Companies are mostly "performing at the level they expected, or just slightly below,” said Tim Dupuis, principal at Pearl Meyer, an executive compensation and leadership consultancy.
Dupuis said he is having conversations with senior management teams and boards who are concerned about keeping the upper echelon of their team in place. They're asking questions about how they can continue to encourage retention such as compensating at above-market levels and retention programs or rewards.
Especially when it comes to succession-planning discussions, "they are thinking about those individuals' compensation programs in a really thoughtful way to make sure those individuals aren't enticed to leave the organization,” Dupuis said.
For lower-level employees, companies are trying to make a stronger "pay for performance culture," Dupuis said. To do this, carriers are focusing more on tying bonuses to individual performance, rather than just company performance and tying salary increases to individual performance, rather than an across-the-board increase, Dupuis said. Giving them more of the pot and leaving less for average or underperformers is a way to send strong messages to top performers, he said.
One of the biggest evolutions in how companies and compensation committees think about pay is the acknowledgement and willingness to consider the use of discretion in how incentive payouts are determined.
Dupuis said he has been having more conversations with boards and compensation committees about the use of discretion given more challenging financials. He thinks discretion will be used "very minimally" but based on how some insurance incentive plans are tracking, discussions are underway. They're mulling over options such as paying out bonuses below targeted levels.