Tom Soter in Board Operations on December 3, 2013
A bonus is determined by the employer and will be treated as any other taxable income. Occasionally, it can be considered a condition of employment. On the other hand, tipping is something shareholders do at their discretion.
Budget for Bonuses
"We recommend to all our boards that they budget bonuses for end-of-year payments," says attorney Mark Hankin, a partner at Hankin & Mazel. "This way all the shareholders are made aware by review of the budget."
The approach is simple. Bonuses are generally organized by the cooperative or condominium board when it meets near the end of the year. "The board usually takes the step of dictating how the staff should be compensated," says Mark B. Levine, vice president of Excel Bradshaw Management Group. "Management is there to offer constructive criticism on [a staff member's] job performance this year, compared to the others, and [help] the board make an informed decision."
Merit Counts — Or Doesn't
The amount of the bonus is generally based upon merit, but not always. "For some boards, it's a matter of business, not dependent on performance in any way; it can be classified as an extension of the employees' salary for the year," says Levine. "Others will critique the employee's year with a performance review and will craft a bonus on the outcome of that review. There is no perfect science for this."
Increasingly, money for holiday tips and bonuses comes from the main operating account, and should be distributed through the payroll. "The days of cash payments are gone," says Hankin.
When deciding on the amount of a bonus, annual reviews are standard operating procedure. Michael Berenson, president of Akam Living Services, says his company "provides the board with written management evaluations of each staff member's performance over the past year to assist in their decision-making."
Levine agrees. "The management company will usually remind them of the upcoming holiday season, show the history of the building's compensation, and then discuss with the board their procedure for the current year."
Above all, the act of giving is important when attempting to retain good personnel. "Remember, most of the employees are union-based in residential buildings," says Hankin, the attorney. "Their pay is set by a collective bargaining agreement. During that three-year period they know exactly how much compensation they will receive, and it's the same at any union building they work at. So, bonuses are attractive to them and give them incentive to continue to do a great job for the cooperative or condominium."
— With interviews by Emilie Ruscoe
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