DETROIT -- General Motors is showing its plan to offer bonuses instead of pay raises isn't just for factory workers. GM said today it plans to freeze its U.S. pension plan for longtime white-collar workers and give all salaried employees annual bonuses instead of pay raises in an effort to hold down expenses.
GM said the deal, taking effect Oct. 1, will cover roughly 19,000 salaried workers, often managers, hired before 2001, according to the Associated Press. It will move from a traditional pension with guaranteed payments to a 401 (k)-type plan with contributions based on salary and bonuses. Employees hired after 2001 already are in the defined contribution plan.
GM was one of a dwindling number of companies that offered pensions instead of 401 (k) plans. No longer.
As for bonuses, they help an automaker like GM ride out tough times in the cyclical auto industry instead of being tied to pay raises, which can become a burden when sales plummet in a recession. Last year, GM signed a significant agreement with the United Auto Workers union that worked the same way.
USA Today