First there are companies that do exactly that in paying bonus. Most home office employees receive their bonus once a year. Some pharma companies, Lilly is one who comes to mind, has moved to this model for field sales people as well. I believe that GSK has moved to a similar model and is an MBO bonus. There are a couple things here, one you save money on anybody who is not employed at the time of the payout and it does decrease payroll costs. Secondly, in terms of only paying people once a year, besides the obvious that no one would come to work here, there are labor and taxation laws that prevent employers from extraneously delaying earned hourly or salaried wages to their employees. The GOV likes to get their payroll withholdings quarterly so the longest that I have heard of for normal wages being paid was one quarter - No four pay checks year per employee. From a tax collection and accounting standpoint that would still be extremeuly odd. I will also add that for bonus payout those funds are 100% in interest bearing accounts and depending on the size of your organization, current vs negotiated rates and risk tolerance, playing the ‘money game’ can prove quite lucrative. Think about a sales force of 1000 reps with average pay our of $40K that is $40M in bonus payout. I’ll let you do the financial calculations but common sense will tell you that it is lucrative for the company to hold that money as long as possible and earn interest on it. Happens all the time as bonus plans, generally speaking (read your IC plan documentation) are not guaranteed and payouts are at the discretion of the board. Regular wages are guaranteed under labor laws… you worked you get paid. Bonus, unless you have a contract, which none of you do, is again at the discretion of the board.
Maybe go to law school and learn about labor laws Mr. Community College finance guy…
