Boom, Bumps and Bonuses

Russian Retailers Must Brace Themselves for Tougher Times as Fewer Employees Hope to Receive Traditional Year-End Bonuses.Retailers eager to accommodate Russians' end-of-the-year binge-spending habit might find this year a tad disappointing. The signs are that this Christmas won't be a jolly season for many Russian workers, as year-end bonuses are becoming less of a tradition and more companies say they are experiencing a particularly rough year, a new survey found. A cheerless mood stemming from the lack of year-end bonuses was reported by 41 percent of Russian employees who were recently surveyed by human resources consulting firm SuperJob.ru. But those were just the ones who said that the gratuitous gifts are beyond their reach this year because their employers have no bonus payment policy. Many others claimed they are losing out because their companies are still reeling from the shock of the 2008 financial crisis.The overwhelming majority of Russian employees polled said they are eager to receive holiday bonuses – year-end lump-sum payments also known in Russia as the 13th salary. And while many Russians don’t necessarily see the bonuses as a reward for hard work and dedication, many Russian companies nonetheless had them in place in the boom years, often as a motivational tool to highlight specific achievements and laud hard work. According to SuperJob.ru, in a boom time, the typical cash holiday bonus in Russia is worth just above 11 percent of an employee's annual salary. However, middle and senior managers typically see a year-end bonus of around 20 percent of their annual salary, the agency said.Perhaps for the first time, Russian workers will be grappling with reality: just as holiday bonuses aren't guaranteed, year-end awards aren't a sure thing either – even for top performers, the agency said. Only 16 percent of companies surveyed said they would reward all their employees this year irrespective of performance metrics – a far cry from the past, when the majority of companies said they normally reward all their workers. And while about 40 percent of companies surveyed by SuperJob.ru said they will be handing out performance-based bonuses this year, only 24 percent of those organizations said holiday bonuses will be paid to individual workers and departments, suggesting the rest could go to top managers. About seven percent of the companies polled cited a “precarious financial situation” as the hurdle preventing them from rewarding their workers this year. However, about 26 percent of companies said it’s not traditional for the company to pay out year-end bonuses, while another 27 percent said they are yet to make a final decision on whether to pay or not. "Most companies are still struggling to shake off the economic effects of the downturn,” said Ksenia Volskaya, the general director of Alpha Personnel, a recruitment agency. “This naturally impacts their decision to pay year-end bonuses to their employees.” Volskaya said she expects food-processing companies, real estate developers and investment banking and information technology firms to pay bonuses to their employees this year. After suffering the worst economic crisis in a decade, indications of financial instability in some Russian companies are resurfacing. About 13 percent of respondents cited such factors as financial instability and the economic downturn as reasons why they would not dream of receiving bonuses this year. "What year-end bonus could one expect, when the management could not even pay normal wages," complained some of the respondents. About one in ten of those polled cited other reasons why they are not expecting to be rewarded this year.While the year-end outlook may be bleak for many, some Russian workers say they expect some mood-lifting news from their employers this year. About 28 percent of those polled said they are counting on receiving some sort of bonus this year, despite the economy still experiencing a downturn, according to the survey. In fact, the number of Russians who said year-end bonuses have become "a tradition or standard practice" in their companies increased by three percentage points this year compared to the previous year. “The average salaries of Russian workers normally jump up 25 percent to 30 percent in December compared to November due to bonus payments,” said Igor Polyakov, an expert at the Center of Macroeconomic Analysis and Short-Term Forecasting. “This normally leads to end-of-year binge-buying and consumption.”Analysts say an inability to pay year-end bonuses is likely to impact retail sales, which are traditionally high during the holiday season. "Those who sell stuff like consumer electronics, gadgets, jewelry and computer products will have to brace themselves for a possible drop in sales if fewer employers pay end-of-year bonuses," said Vladimir Kuznetsov, a consumer analyst at Unicredit Aton. "However, grocery stores and food retailers are unlikely to be affected because traditionally end-of-the-year demand for food is always steady."