December is when companies traditionally pay bonuses, and many employees are looking forward to – and banking on – these additional funds. Most staff have gone beyond the call of duty in 2022, dealing with stressful work situations, while facing rising personal costs ranging from transport to food and electricity.
“Some companies may offer a bonus, but it’s wise to make plans with it only once it’s paid into your account,” says Shafeeka Anthony, Marketing Manager of JustMoney.co.za, a website that helps South Africans make the most of their finances.
“Having been paid a bonus in the past is no guarantee of a recurrence. Many enterprises are struggling to survive and are cautious with their cash reserves. They are unlikely to splash out and pay large bonuses – or, perhaps, to pay bonuses at all.
“The bottom line is that you need to manage your expectations.”
- Read a JustMoney article on how to control festive season spending and still have fun.
If you are fortunate enough to receive a bonus, it’s important to map out how you will allocate this windfall, says Anthony. It’s also advisable to implement your plans as soon as you receive the payment, otherwise it could get whittled away in festive season spending.
JustMoney offers the following tips:
- Take tax into account. Your bonus forms part of your total taxable income, so do be aware that deductions will be made.
- Pay off debt. Determine your most expensive debt – generally your credit or store cards – and allocate funds accordingly. Paying off even one loan can be a good psychological boost ahead of the New Year.
- Boost emergency savings. The relief of having cash at the ready if, for example, your pet falls ill or your car needs major repairs, cannot be overestimated. Keep this money in a separate account, where it is less accessible, but available immediately if needed.
- Consider retirement. If you have not yet started investing, consider allocating a portion of your bonus to an investment such as a unit trust or a tax-free savings account. A retirement annuity is another popular option that attracts tax benefits per financial year. You have until end-February 2023 to make this payment, so speak to your tax adviser about a suitable contribution.
- Meet commitments. If you have school-going children, consider setting money aside for fees, uniforms, tech and sports equipment.
- Reward yourself. You’ve had a tough year and it makes sense to invest a little in your health and wellbeing over the festive season.
- Find out more about affordable family get-togethers.
Factors that may contribute to your bonus payment include work hours, performance against targets, and the company’s profitability. If you are disappointed by your bonus, or you are told that you will receive no extra payment, Anthony suggests adopting the following course of action.
- Don’t react immediately. You are probably not in the best state to respond calmly and logically. Request a meeting on a date that allows you time to process and reflect.
- Do your homework. Check your contract and communications from the company before meeting with your manager. If you had a performance review, how did your assessment match up with your bonus? Did the company make a profit overall? What is the norm at competitor firms? Recruitment agencies are a good source of sector information.
- Be constructive. Be receptive to feedback from your manager. Make your point clearly if you believe the lack of compensation is unfair. Establish clear performance targets for the year ahead.
- Consider alternatives. If you believe your financial future is limited with your current employer, do explore your options – but plan carefully. You will regret quitting in a temper.
- Get objective advice. Your lack of expected income is a reminder of the importance of budgeting, saving and planning for tough times. Consider booking an appointment with a reputable financial adviser, who will assess your situation objectively and holistically. You can then strategise how best to reach your goals.
- Work out a budget. The word “budget” may sound boring, but knowing what you spend, and where your money goes, is the only way to get a clear idea of your financial situation. Review your bank statements, or make use of a budgeting app that will help you track your spending.
Finally, do not take on more debt over the holidays, advises Anthony. While you may be tempted to take out a loan to meet short-term commitments, keep in mind that this sum will have to be repaid, plus interest. Avoid putting yourself under additional pressure, on top of existing financial commitments.
JustMoney.co.za, established 15 years ago, is a trusted voice within the personal finance sector. The JustMoney website offers articles, money management tools and a wide range of financial products and services. Over 250,000 South Africans subscribe to the newsletter to stay informed and become financially savvy. Find the website here.