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Comment by josefresco | Hacker News Reader

Bonuses are cheaper than pay increases.

They're also better for stability in numbers of employees, as it's easier to reduce expenses in bad years without having to go through layoffs.

True. On the other hand, if the increase in revenue is at least partially caused by inflation and it's not to be expected that deflation will revert this effect any time soon, new hires might expect significantly higher wages then what is currently paid within the company. If the current workforce is keeping their pre-inflation wages and new hires are receiving higher wages, this causes an increase in turn-over rate which is exactly what can be seen in Germany throughout the last two years.

Admittedly, there might be other, additional causes to this. It should still be considered if higher turn over is a business risk for the company.

I think most companies and industries where bonuses make up a significant portion of total compensation still usually have annual inflation adjustments to base salaries, largely to avoid this problem.

In an ideal world, people would be a bit better about managing uncertainty and most people would be able to live comfortably within their means on their base salaries and would have the restraint to invest large percentages of their bonuses.

Fair, but then it's not a question of either one or the other. Im not arguing against bonuses. It just shouldn't be the only outcome of what's expected to be a permanent increase in revenue.

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