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Case question 101 here. Why do you think? Come up with some sensible hypotheses.
Incentivize performance obviously... Also the bigger effect is keeping top performers happy with higher than average pay.
Lower baseline payroll costs? Don’t have to pay a bonus.
Aka performance incentives
1) retention directly related to % of bonus
2) variable comp based (in part) on business performance.. shitty year won’t break the firm
3) allows for higher comp to best performers (good carrot everyone is after)
Motivation. Monotonous same payment all year doesn’t give much to strive for. Also gives a timeline to accomplish things by, start fresh in a new year, etc
Variabilized cost base in unpredictable industries.
Wouldn’t u be more productive if u knew each month you’ll get higher $? People who are incentivized by sticking around for a year end bonus are not exactly ppl unwanted to retain anycase
If that year end bonuses is guaranteed, sure, your comment might apply to some people who may be just waiting around for a bonus. Here, it certainly is not guaranteed (and is a very large % of comp). So low performers will not stick around.