Americans' year-end bonuses drop more than 20%

American workers could receive smaller year-end bonuses in 2023, as the country's economy remains volatile.

New data released by payroll software company Gusto (USA) shows that in December, the average year-end bonus at US companies was about $2,145 - down 21% compared to the same period last year. Compared to 2019 - the time before the pandemic, this figure is up to 40% lower.

"While the market remains stable, hiring activity and job growth have slowed in 2023," the report said.

Bonuses fell across most sectors last year. The biggest drop was in the transportation and tourism sector, down 36%. This could be due to weaker demand in those sectors. Bonuses in retail, restaurants and bars, and health care were also notable, with double-digit drops.

In contrast, tech is one of the industries that still offers the best compensation, despite the wave of layoffs earlier this year. The industry’s compensation dropped just 3.8%. This suggests that companies “may be more optimistic about their business outlook in 2024.”

The biggest bonuses are in finance, with an average of $13,255, according to Gusto. That’s still down about 12% from 2022 and 2021.

There are several reasons why year-end bonuses in the U.S. are falling. Companies aren’t hiring as aggressively as they were a year ago, according to data from the St. Louis Fed. Soaring inflation and record layoffs have forced many companies to offer generous bonuses over the past two years, leaving them with little money left in their budgets.

In addition, the number of people who voluntarily quit their jobs in November fell to the lowest level since September 2020. When workers are not confident in their ability to find another job, businesses also have less incentive to reward them generously.

“Many workers will likely be disappointed with this year’s year-end bonuses, as the amounts are mostly down from last year,” the report said, adding that companies with limited budgets appear to be less concerned about employee retention than they have been in recent years.

Not only did the amount of money decrease, but so did the percentage of employees receiving year-end bonuses. Nearly 75% of sectors recorded a decrease in the number of employees receiving bonuses. The largest decline was in the arts and entertainment industry, with 18.5% fewer employees receiving bonuses than in 2022. On average, the number of employees receiving bonuses decreased by 2.7% compared to the previous year.

Ha Thu (according to Fox Business)

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