LONDON, 17 September 2014 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), has said that responses to its European Bonus & Sales Compensation Survey 2014 show that bonus plans and levels of payment are back on the increase, with the UK leading the way.

Andrew MacLeod, head of Pay Research at Aon Hewitt, said:

“Since the start of the financial crisis in 2008, bonuses have received a generally bad press and the financial services sector has seen UK and EU regulators move to cap and defer high annual bonus payments. However, our latest study of bonus plans throughout all levels of industry in Europe finds pay on the increase in every other sector.”

“With the majority of companies their bonus plans now cover the entire organisation, a significant change since 2012. A shift of more pay costs from fixed to variable and reinforcing key business goals such as customer service are reported by participants to be driving this popularity.”

Aon Hewitt’s European Bonus & Sales Compensation Survey 2014 covers the UK and 14 other countries in Europe, with companies in more than 20 sectors.  Aside from showing the sustained popularity of bonus plans, 94% of participants indicated that they regard their plans as well aligned with their business objectives, while three-quarters of them saw the company achieve or exceed its business goals, driving higher and over-target payment levels generally. 

However, the study also shows that payments can be seen to be increasingly hard to earn - a legacy of the difficult recession years and also the increased spotlight on senior and variable pay. The majority of companies now have minimum corporate performance thresholds or triggers - most commonly a profit level -which has to be achieved before any payments can be made.  This is in comparison to just 10% of organisations doing this in 2011. Zero bonus payments were also the order at 74% of companies - the result of poor individual performance in the past year.  This compares to less than half the companies surveyed in 2011. 

On the other hand, higher individual performance is being increasingly well rewarded, with a significant minority of firms increasing or even removing the maximum cap set on payments and, particularly in sales incentive plans, using over-target payment multipliers.

The study implies that bonus plans have again become an integral part of the reward package for managers and employees across Europe. But these plans are changing, with a majority of companies reporting redesigns, most commonly in terms of:

• Re-designing plan measures and performance criteria - almost 40% of participants;
• Improving the communications and employee understanding of plans in order to enhance the incentive effects - almost half the participants, with a further 38% planning additional communications/training initiatives in the next 12 months.

Andrew MacLeod said:

“Rather than debating the philosophical point of whether or not bonus plans work, companies seem to be more focused on assessing whether they are working in reality and improving their design to make them more likely to succeed. 94% of our study’s respondents now have a review process in place, with a big increase in the use of cost/benefit analysis.”

Respondents to the study indicated that in their view a successful plan is underpinned by:

• In terms of plan design: narrower focus on a few key performance measures that drive personal and company success.
• In terms of process: top-level leadership support and example, realistic goal and target setting, and world-class communications.

Andrew MacLeod continued:

“Now, as we emerge from a recession and move into another economic phase, European companies are more aware of the limitations as well as the advantages of bonus and incentive plans. They are working hard to make payments more genuinely variable and performance-related, and making certain that they are rewarding both corporate and individual performance more effectively”.

 - Ends –

Notes to editors

Aon Hewitt’s European Bonus & Sales Compensation Survey 2014 is available from: http://bit.ly/1r8Bud1

About Aon Hewitt
Aon Hewitt empowers organisations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organisational and personal performance and growth, navigate risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness.  Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide.  For more information on Aon Hewitt, please visit www.aonhewitt.com.

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About Aon
Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 66,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, best reinsurance intermediary, best captives manager, and best employee benefits consulting firm by multiple industry sources. Visit aon.com for more information on Aon and aon.com/manchesterunited to learn about Aon’s global partnership with Manchester United.

Media Contacts:

Marina Jane Sanchez
Capital MSL
020 3219 8811
marina.jane-sanchez@capitalmsl.com

Colin Mayes
Aon Hewitt
01372 733689
colin.mayes@aonhewitt.com