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More Companies Giving Bonuses Instead Of Raises

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MIAMI (CBSMiami) - They say that hard work pays off.

These days more and more workers are finding that pay off comes in the form of a one time bonus instead of an annual pay raise. The trend has been building with a growing number of companies since the recession and it doesn't appear to be slowing down even though the economy has improved.

Emily Sidley, senior publicist of Three Girls Media, said when she got her first performance bonus instead of an annual salary increase she understood it was because of the shaky economy.

"I knew money was tight so the fact that I received a bonus made me feel appreciated and valued," said Sidley.

As the economy got better, Sidley said her boss continued to reward her performance with an extra infusion of cash.

"It makes me feel like they haven't forgotten about me and I can help celebrate in the company's success," said Sidley.

According to the Society for Human Resource Management, spot bonuses have grown in popularity over the last five years. A survey found 49-percent of companies give non-executive incentive bonuses. That's up from 40-percent last year.

"The trend is that employers are giving more and more bonuses more frequently and pulling back on the annual salary increase. It's going across a variety of industries like healthcare, agriculture, education, nonprofits and it's not only at the upper management level either. It's all different levels within the organization," said Monster career expert Vicki Salemi.

So what is driving the trend?

Experts say one-time bonuses, or other forms of variable compensation like gift cards or perks, give companies more financial flexibility than committing to a salary increase.

"You can budget a one-time bonus much better than you can a long term raise when you don't necessarily know how the company is going to be performing a year, two year, three years down the road," said Erika Taylor Montgomery, CEO Three Girls Media.

Experts point out there are drawbacks to incentive bonuses. For example, they don't compound over time like salary increases do. And a lower base salary can affect things like retirement benefits or a mortgage application.

"You don't know when to plan for it. So if you're buying a car or if you're investing in something, you won't know when you'll receive it nor how much it will be," said Salemi.

A growing number of experts believe the days of large annual salary increases are over. They predict we will continue to see an evolution of a mix of smaller raises and bonuses.

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