Thursday, March 12, 2009

A Million for Clothes

One of my students works for an international fashion designer. If you're into clothes (and I'm not, but I figure some people must be), you would certainly recognize her company's name. Recently, she and I were discussing how to motivate employees as part of a lesson and I asked her what sort of incentives the company gave her to do her best.

My student said that everyone gets a "clothing allowance" of about a million yen ($10,204) which will be reduced if they don't do particularly well for a long time. Note that amounts of money always sound more impressive in their yen figures than when you convert them to dollars. One can easily be a "millionaire" if you measure in yen.

On the surface, this sounds like a really good deal. She gets free designer clothes in an amount of money few of us could spend, but it's not so great when you scratch beneath the surface. The primary problem is that the company keeps employees' salaries lower because of this allowance. She said she'd rather have the million yen than the clothes. Also, these are designer clothes so the money isn't going to buy as much as run of the mill clothing. Finally, and this is the worst part, she has to pay taxes on the allowance. That means that she pays 10% or 100,000 yen ($1,200) out of her reduced salary for this allowance. This benefit ends up costing her and she has nothing to show for it but piles of clothes that she may not especially want.

I know that companies all over the world use these sorts of "bonuses" to make their compensation more attractive, from free meals at McDonald's to employee discounts on big ticket items, but given that she's forking over a lot of money in taxes, this seems more egregious. When a "bonus" ends up costing you 25-30% of one months salary, it seems like no bonus at all.

2 comments:

Girl Japan said...

That is so NOT a bonus AT all, when I got married, I was only paying 5.8% in taxes on my Salary, at most I paid 8%, which is much less than when I was living in the US once 30%...

I rather have the yen too....

'badmoodguy' is mike said...

Definitely not a bonus! That is a crazy amount of money to have wrapped up in clothes. Looking at it from a company standpoint it is probably not actually costing them but a fraction of that amount. It can act as a sort of morale-builder and make their employees think it is a fantastic benefit but not really cost anything in real money.