What Happens When You Mix Poor Communication and No Bonuses?
Philadelphia-based food-services giant Aramark has been facing loads of bad publicity lately. Students at some of the colleges serviced by Aramark have been demanding that their schools sever ties because of allegedly unsanitary conditions and improper management practices at the prison cafeterias Aramark oversees. Last year, students at two universities with cafeterias operated by Aramark—Loyola University and New York University—complained that the company had promoted a special Black History Month menu that was racially insensitive. Aramark responded by apologizing and, in the NYU case, firing two of its employees.
One of those former employees, a facility manager, responded with a lawsuit, accusing Aramark of scapegoating him for decisions about the special menus that were made by senior-level managers. The plaintiff, Tim Hoben, alleges that after being told by an on-site supervisor that he’d done nothing wrong, he received a phone call at his home later that day from a senior Aramark official placing him on suspension pending an investigation. That investigation never took place, Hoben says. Instead, he received a letter from HR two days later notifying him that he was terminated. Aramark told New York magazine, which reported the story, that Hoben’s claim was baseless and would be contested in court.
Confusion Over Bonuses
More recently, Aramark has been engulfed by a pay controversy—specifically, its decision not to pay bonuses for the 2018 financial year to thousands of mid-level managers, despite awarding top executives their bonuses for that year.
As reported by the Philadelphia Inquirer, Aramark recently announced it would not pay front-line managers their annual bonuses, which were traditionally paid out in December of each year. Instead, managers within certain pay bands would get one-time payouts based on the company’s savings from the 2017 Tax Cuts and Jobs Act, which were estimated at $100 million.
Company officials told Inquirer reporter Harold Brubaker that the annual bonuses to managers would not be paid out this year because Aramark did not meet certain profit targets set by its board of directors.
However, top executives—including CEO Eric Foss and CFO Stephen P. Bramlage—received their full annual incentives. In Foss’s case, that amounted to $2.6 million in incentive bonus, for a total compensation package of $16 million for 2018. Bramlage told Brubaker that manager bonuses were eliminated this year because Aramark missed its adjusted operating income target for 2018 by 5 percent. Managers received their bonuses in 2017 because the company missed its target that year by only 2.4 percent.
Executives received their bonuses because those are based on whether Aramark meets its minimum revenue targets, Brubaker reported.
The Inquirer said that at least three dozen Aramark employees sent emails to the paper complaining about their treatment by the company. One manager said he missed out on $13,000 because of the canceled bonuses.
An Unusual Change
By all accounts, the company’s communication efforts about the issue to employees have been poorly handled. Managers had been told in December that their bonuses would be paid in February.
Bramlage told Brubaker that Aramark’s managers should know that the company has the right to alter compensation plans at its discretion. He admitted, however, that its communication strategy on the matter may have fallen short.
Most companies change their bonus rules from time to time, but typically for future years—not retroactively, employment attorney Susan L. Swatski told the Inquirer.
“They are thinking about morale, they are thinking about the effect on productivity in the future,” she said. “Retention is an important factor, especially in this economy where obtaining talent can be difficult.”