Bonus Awards System

in socialist enterprises in the USSR, the main form of providing material incentives to workers for individual or collective success in their work. In 1919, V. I. Lenin wrote that “bonuses would be impermissible under a full communist system, but in the period of transition from capitalism to communism bonuses are indispensable” (Poln. sobr. soch., 5th ed., vol. 38, p. 98). The experience of building socialism and laying the material and technical foundations for communism has confirmed the viability and necessity of this type of incentive.

Bonuses come from two sources: the material incentive fund and the wage fund. They are a supplemental and variable part of wages, unlike the tariff rates and official salaries, which constitute the basic and relatively stable part of wages. The role of bonus payments has increased as a result of the economic reform allowing material incentive funds to be created from profits earned at enterprises operating on the basis of economic accountability. The size of the bonuses depends on the individual labor contribution of the worker and the degree to which the enterprise has fulfilled the qualitative and quantitative indexes of the plan.

The most widely used system is the regular bonus awards system. This is the basic form of material incentive for industrial workers and clerical and professional employees and is determined by the system of remuneration for labor in general. The system of regular bonus payments operates in accordance with regulations for bonus payments worked out at plants or organizations on the basis of the Model Regulation on Bonus Payments for Workers and Employees in Industrial Enterprises Transferred to the New System of Planning and Economic Incentives. This regulation was approved on Feb. 4, 1967, by the State Committee of the USSR Council of Ministers on Labor and Wages and by the presidium of the All-Union Central Council of Trade Unions. The administration of an enterprise, in consultation with the factory trade union committee, independently selects most of the indexes and terms for bonus payments and decides the size of bonuses and the persons to receive them. Various qualitative and quantitative indexes are used. For example, regular bonuses aimed at improving quantitative indexes are awarded for the fulfillment and overfulfillment of production plans, standardized targets, and technologically valid output rates and also for the reduction of labor intensiveness. Among the indexes often used in awarding bonuses to workers for improvement in the quality of goods and labor are production of nondefective goods, reduction of losses through breakage or defective goods, and fulfillment or overfulfillment of the plan targets for certain grades or varieties of goods. Workers are also awarded bonuses for economizing on materials and tools and for improved results in the economic activity of a brigade, sector, or workshop. Regular bonuses are paid to managerial personnel for fulfillment and overfulfillment of plans for the sale of goods or for profits realized and also for meeting or exceeding goals for increased labor productivity, for a higher proportion of quality goods, and for increased profitability. The engineering and technical personnel and staff of workshops are paid bonuses in accordance with one or several indexes, among which may be the fulfillment or overfulfillment of plans for volume of production and quality of goods, productivity of labor, and reduction in prime cost.

Important organizational considerations include the periodic review of bonus payments and the raising of the level of the indexes for which bonuses are paid. Failure to meet this requirement weakens the role of bonus payments as incentives and can transform bonuses into mere wage supplements. In order to improve the system of bonus awards, one should take into account the extent to which a given worker contributes to increasing labor productivity and the efficiency of production as a whole.

The size of bonuses for industrial workers and clerical and professional employees is based on the contributions made to the overall results of labor. There is no limit to the size of bonuses paid from the material incentive fund. Bonuses paid to workers from the wage fund must not exceed 40 percent of piecework rates or standard wage rates; the figure is 60 percent for certain categories of workers in the electrical-engineering, coal, chemical, and ferrous metallurgy industries. Total or partial rescinding of bonuses for certain workers is permitted in cases of negligence in production or absenteeism; it is also permitted if charges of administrative or criminal misconduct are brought against a worker and as a measure of social pressure against hooliganism.

The material incentive fund is used to pay bonuses to workers who have achieved success in socialist emulation within the factory and to those who have distinguished themselves in fulfilling an important production goal; these are among the main uses of the fund. The same fund is a source for remunerations paid to workers for the overall annual results of labor in a given enterprise; the size of the payments depends on each worker’s personal contribution to fulfilling or overfulfilling the plan and on the length of the worker’s continuous work record at the enterprise.

To solve problems important to the national economy, various types of bonuses are paid to industrial workers and clerical and professional employees out of special funds at individual enterprises. Bonuses are awarded for developing and introducing new technology, delivering goods for export, producing consumer goods from remnants of raw material resulting from the productive process, and for outstanding results in socialist emulation.

The payment of bonuses serves as both a material and moral incentive. Bonuses are seen as a recognition of the merits of a worker and have great educational value. In socialist emulation, bonuses ensure a more complete blending of material and moral incentives for labor.

The role of that part of wages paid out in bonuses and incentives has grown significantly in the context of economic reform in other socialist countries as well. In many socialist countries, the basic principles regarding the payment of bonuses and the maximum size of bonuses are centrally established. Enterprises independently decide questions involving the selection of indexes and terms of payment, and they determine timing, procedure, and the persons qualifying for bonuses. In addition to the wage fund, other incentive funds are used for the payment of bonuses; among these are the fund for additional material incentives in Bulgaria, the unified bonus fund in the German Democratic Republic, the profit-sharing fund in Hungary, the bonus fund for engineering and technical personnel and the enterprise fund in Rumania, and the remuneration fund in the Czechoslovak Socialist Republic.