Mainfreight founder says bonuses help solve inequality and social unrest

Wednesday, 31 July 2019

Bonuses are discretionary or performance-based says Canterbury Employers Chamber of Commerce ceo Leann Watson says

Mainfreight founder Bruce Plested says businesses can help solve inequality and low wage growth through profit sharing with employees, which this year cost the company $27 million.

He said it was a significant factor in the company's success - by contrast, shareholders were rewarded with dividends totaling $56m.

But Bill Newson, E tū national secretary said while bonuses were nice, they were no substitute for real wage recognition, and wage growth over time.

Bruce Plested says low wage growth leads to a belief that capitalism is failing.

'One-off bonuses have a place, recognising achievement in businesses from time to time, but not if that's at the expense of real wage bargaining.

* Mainfreight founder turns eye to social and environmental issues

* Mainfreight's new depots usher in expansive phase**

'A cash bonus doesn't add to hourly rates and so does not compound, and that affects other payments as well, for entitlements like super, holiday pay, and sick leave,' Newson said.

At the annual meeting this week Plested said that sharing profits amongst the people who helped create them should be an essential part of capitalism.

Mainfreight workers receive bonuses based on increased profits in each branch. (File photo)

'One of the modern problems of the Western World is the perceived increase in inequality and low wages growth, leading to a belief that the capitalist system is failing.'

He highlighted a New Zealand film Capital in the 21st Century showing at the International Film Festival based on a book by French economist Thomas Piketty, suggesting the accumulation of excessive wealth by too few members of society had caused destruction, including the French revolution, Russian revolution, two world wars, the 1930's depression, the 2008 global financial crisis, and election of populist political leaders.

'It is a basic premise of capitalism to have the lowest possible input costs, but there is no particular premise that the enterprise, if successful, must hold on to all the profits. This may be a flaw in the interpretation of the capitalist model that is contributing to inequality,' Plested said.

Mainfreight managing director Don Braid told Stuff said the 'discretionary annual bonus' was paid on any increase in profit of individual branches rather than spread over the 8000 people who worked for the company. They were eligible after 12 months with the company.

The company was 'on track to achieve an entry level annual salary of at least $60,000 in the near future'.

Mainfreight managing director Don Braid, left, and founder and chairman Bruce Plested who says businesses should share profits with workers.

Braid's own remuneration increased more than $100,000 to $2.7m which included a discretionary performance bonus of $583,095 based on last year's revenue and profit growth. The company posted record profit after tax of $137m on revenue of $2.9 billion.

Braid and chairman Plested did not take directors fees which are $120,000 a year for each director.

Canterbury Employers Chamber of Commerce chief executive Leeann Watson said bonuses were relatively common but it was important to distinguish between discretionary payments as opposed to performance payments.

Teams at each Mainfreight depot get bonuses when they improve on the previous year's efforts. (File photo)

A discretionary payment was essentially a gift whereas a performance bonus was often part of a worker's terms of employment.

Canterbury Employers Chamber of Commerce chief executive Leeann Watson says there is a difference between discretionary and performance-based bonuses.

'It can create confusion because they very different', Watson said.

Watson said she did not believe bonuses were a way of topping up underpaid workers.

Julia Morgan, senior employment relations adviser at consultancy Employsure estimated about 30 per cent of businesses used some form of bonus.

'We generally recommend that bonuses do not form part of a contractual entitlement, so there is no absolute right that an employee will receive a bonus.'

If employers wanted to offer any discretionary bonus scheme, including any conditions around payment of the bonus and eligibility criteria, they should be provided in a separate document which clearly stated it does not form part of the contract of employment and the scheme can be varied, withdrawn or amended at any time by the employer, she said.

'Bonus schemes do not always have to be monetary or have a significant cost. Gift vouchers, movie tickets, or an afternoon off are all ways to reward staff for a job well done,' Morgan said.

Employsure also recommends rewards such as professional development opportunities, time too pursue a favoured assignment, recognising non-work achievements, gifting the chief executive's car park for a week, personalised thank you notes and gifts, celebrating milestones, and recognition at company events.

Mainfreight's team newsletters reveal most of these methods are used, with a large number of functions and awards.