United Replaces Employee Bonuses With a Lottery, Significantly Cutting Payouts

Mar 3, 2018

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In recent years, United Airlines has rewarded eligible employees with a quarterly cash bonus of up to $300 if the airline hit certain on-time operational measurements. Now, that bonus is being replaced with a quarterly lottery, with one lucky employee scoring a $100,000 bonus and another 10 employees getting their choice of $40,000 cash or a Mercedes-Benz C-Class, along with a number of other prizes.

United Airlines President Scott Kirby tried to sell the new program on Friday in an internal memo to employees:

The reason for this change goes to the heart of our strategy: offering meaningful rewards will build excitement and a sense of accomplishment with more bang for the buck.

We want every United team member to picture themselves walking home with a grand prize, or driving home in a beautiful car that announces for all to see that you are committed to your success and ours.

Some employees might like the idea of trading a $300 bonus for a chance at $100,000 or one of the 1,360 smaller prizes. However, there are two groups that definitely love this new bonus plan: United’s management and shareholders. The new system will serve to cut employee bonuses overall by tens of millions of dollars each year.

A United Airlines spokesperson confirmed that the new system will include the following quarterly prizes:

Prizes Winners per Quarter
$100,000 cash 1
Mercedes-Benz C-Class or $40,000 10
Platinum United Vacations package or $20,000 20
Gold United Vacations package or $10,000 30
$5,000 cash 300
$2,000 cash 1,000

At first blush, this might seem like a rather generous giveaway. However, it turns out be much less than what the airline is currently paying out with its $300 quarterly bonus.

These 1,361 prizes add up to $4.7 million in giveaways each quarter. That’s equivalent to about 15,667 employees receiving $300 quarterly bonuses. But per United’s 2017 annual SEC filing, the airline employs 89,800 employees. While it’s unclear how many of those employees are eligible for the $300 quarterly bonus, it’s surely more than 17.4%.

But let’s assume that just unionized employees who work as flight attendants (22,676 employees), in passenger service (13,299) and pilots (9,535) are the only ones eligible. Those 45,510 employees would have been eligible to earn a total of up to $54.6 million in bonuses per year under the old $300/quarter system. The new system caps the airline’s quarterly bonus costs at $18.8 million per year. That’s tens of millions less in employee bonuses.

But wait, there’s more. In order for an individual employee to be eligible for the lottery, he or she needs to record perfect attendance. Employees who’ve had their $300 per quarter bonus eliminated are now incentivized to show up sick for flights in order to get a chance at a prize.

A United spokesperson responded to a TPG request for comment saying that the airline believes “that this new program will build excitement and a sense of accomplishment as we continue to set all-time operational records that result in an experience that our customers value.”

However, the reaction is shaping up to be a very different sense of “excitement” than what the airline hoped for. The announcement of this new bonus system has “ignited a firestorm” among front-line employees, according to the Chicago Business Journal. And for good reason.

This article has been updated with information received from a United Airlines spokesperson after publishing.

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