Pros and Cons of Salary Systems with High Bonus Ratios
Even with the same annual income, it is easier for people with higher monthly salaries to plan their lives.
Recently, my company decided to change its salary system.
It seems they will incorporate the bonus portion into the monthly salary and eliminate bonuses.
Since incentives will be paid separately, the base annual income itself will not change.
For those who have set up their home loans or car loans to be paid using bonuses, managing their finances might become slightly more complicated.
However, I welcome this change.
This is because I have come to feel that monthly cash flow is important while continuing my life as a company employee.
And in fact, a similar trend is occurring across Japanese companies as a whole.
The sense of discomfort I felt with recent bonuses
This year's bonus season is approaching.
Social media is already starting to buzz.
“It was the highest ever.”
“I’m going on a trip.”
“I’m buying a car.”
“I’m putting it into investment funds.”
It’s an annual scene.
Of course, I am happy when I receive a bonus myself.
When a lump sum of money comes in, I feel more generous.
However, I have started to have a slightly different feeling over the past few years.
Bonuses are certainly nice.
But when I think about it calmly, it is just receiving the value I created through my work as a deferred payment.
On the other hand, the monthly salary remains the same.
Home loan payments, nursery school fees, and food expenses all occur every month.
It is also a monthly occurrence for children to get sick and go to the hospital.
Even though life continues every month, money only comes in as a large sum once every six months.
I have come to think that this structure is surprisingly unbalanced.
Why are companies shifting to monthly salaries?
Recently, there has been an increasing movement, especially among large companies, to lower bonus ratios and shift them to monthly salaries.
There are several reasons for this.
First is the competition for recruitment.
The younger generation tends to value monthly take-home pay more than bonuses.
This is because the monthly salary is what catches the eye when looking at job postings.
Also, with the activation of the job change market, companies have come to value the appearance of monthly salaries.
Furthermore, inflation is a major factor. Price increases happen every month.
Rather than a bonus six months later, having more take-home pay this month has a greater impact on daily life.
Both companies and employees are beginning to think that “paying now” is more rational than “paying in a lump sum in the future.”
From an investor's perspective, monthly salaries are stronger
Personally, I think the biggest impact is on asset formation.
For example, an environment where you can invest 50,000 yen more every month versus an environment where you invest 300,000 yen in a lump sum every six months.
Looking only at the numbers, they are the same.
But in reality, they are different.
It is easier to systematize monthly contributions.
Humans want to spend money when they receive a lump sum.
Travel, home appliances, hobbies.
Bonuses have the power to loosen the purse strings.
On the other hand, if you receive it as a monthly salary, it is easier to allocate it to automatic savings.
I myself feel that, while continuing to invest, monthly investment is overwhelmingly easier than lump-sum investment.
Simulating monthly contributions of 50,000 yen versus 300,000 yen every six months
Although the profit is small, a difference of about 100,000 yen arises over 10 years.
The following is the result calculated by Gemini.
After 10 years, even with the same principal, the difference is over 100,000 yen.
Therefore, a system with a higher monthly salary is more compatible with asset formation.
There is also value in the bonus system
Of course, the bonus system is not bad.
Rather, it was well-suited to the Japanese lifestyle.
Bonus payments for home loans.
Purchasing cars.
Family trips.
It is easy to plan for large expenditures.
Also, if business performance is good, there is a possibility that it will increase significantly.
“I worked hard this year.”
There is also a sense of accomplishment.
Therefore, the bonus system has emotional value.
However, that is a separate issue from the rationality of asset formation and household budget management.
What you overlook when looking only at annual income
When it comes to changing jobs, many people compare annual incomes.
But what you should really look at might be the salary structure.
Even with an annual income of 9 million yen,
between someone with a monthly salary of 750,000 yen
and someone with a monthly salary of 500,000 yen plus a 3 million yen bonus,
the stability of the household budget and the ease of investing are different.
Even with the same annual income, the way you deal with money becomes completely different.
This is similar to corporate analysis.
The reason many investors look at cash flow rather than just profit is that it is closer to the actual situation.
I think the same applies to individual household budgets.
Summary
Bonuses are great.
I still feel that way even now.
However, as I have aged, had children, and continued to invest, my perspective has changed slightly.
The fact that companies have recently started shifting bonuses into monthly salaries is not just a simple system change.
Inflation, the job-hopping market, and wealth building.
It is likely the result of adapting to these changes in the times.
Looking at annual income is important.
However, it is just as important to pay attention to how you receive your salary.
If you do, your perspective on choosing a company and how you work might change a little.
[Lessons learned from this article]
Even if your annual income is the same, the timing of when money comes in changes the degree of freedom in your life. When looking at your salary, it is better to pay attention not only to the total amount but also to your cash flow.