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Despite Covid-19, 40% of tech companies will be handing out 2020 bonuses

Despite Covid-19, 40% of tech companies will be handing out 2020 bonuses

The company’s funding stage and the employees’ performance are what determines the size of the prize

Maayan Manela | 14:01  27.12.2020
Forty percent of tech companies in Israel will grant their employees a yearly bonus worth 105% of their monthly salary for 2020, but whether or not they do so, is heavily impacted by the company’s funding status. Ninety percent of post-IPO or post-acquisition companies grant bonuses, while only 2% of seed or series A companies do, according to data collected by HR analytics startup Piplwize.

“At the end of the day, you as a manager must assess which ecosystem you belong to. A seed company is in no way like a company that completed an exit and as the figures show, only 2% of them hand out bonuses. In those companies, the compensation makeup is different and is based more on options. A companies’ ability to identify their true peers impacts their decision making and the correct course of action at a given time,” said Piplwize co-founder and CEO Amit Rapaport.

An employee celebrating his bonus. Photo: Shutterstock An employee celebrating his bonus. Photo: Shutterstock An employee celebrating his bonus. Photo: Shutterstock
The data, which is based on the bonus granting policies of 100 tech companies, reveals that the percentage of companies that hand out annual bonuses stands at 50% among series D and E companies and 35% among companies at the series B or C stage.

The size of the bonus is directly correlated to the employee’s performance. While for most it equals slightly more than their monthly salary, the ‘stars’ can receive as much as one and a half to three times their monthly salaries.

“It’s not necessarily those with the best performance, it can also be those considered ‘key players’ - people with a great deal of organizational knowledge, who possess a company’s strategic data, or who are very influential or significant to the company,” Rapaport said.

“There is a direct correlation between a company’s financial capabilities and its ability to grant bonuses and between an employee’s performance and the size of it. The more critical an employee is to their colleagues, managers, or the company’s goals, the higher their bonus will be. It is one of the ways a company can show its appreciation. There are others like promotions and raises, but bonuses are very common,” she added.

Among the companies whose data was used for the study, there was no difference in the size of the bonus between executives and other employees. “It’s nice to see that the multiplier is the same across the company, so there is no correlation between the size of the bonus and the employee’s seniority level. We didn’t see cases in which managers received a bonus equal to twice their monthly salary and a non-manager only one. Employers value their workers’ contribution across the board from the most junior employees to the highest-ranking executives,” Rapaport said.

The coronavirus (Covid-19) pandemic apparently had no impact on the distribution of bonuses in the tech sector, with the determining factors being funding stages and employee performance.

According to Avi Nir, CEO of Compvision, a company that specializes in executive compensatoin, as long as the company can afford to, it should keep on paying bonuses even during the Covid-19 crisis.

“A smart compensation policy advances the organization, ensures that executives and top performers remain, and incentivizes them to succeed even when times are tough. Bonuses have to be tools that drive people to excellence. It is important that they be granted based on parameters that are as objective as possible. Transparent parameters will make it clear to managers and employees that the bonuses are indeed linked to performance and success,” Nir said. “Correct compensation policies help companies retain and encourage their best people and are an important success enabler also in the Covid-19 era.”

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