PSMJ’s 2025 AE Bonus & Benefits Benchmark Survey Report is out and the data makes it clear: the last two years reshaped how architecture and engineering firms think about incentives. Comparing PSMJ’s 2023 and 2025 (published every other year) data shows a quiet but important shift in that firms are moving from broad, high-octane bonuses aimed at retention toward tighter, performance-linked designs.
1) Bonus funding cooled—on purpose
In 2023, the median performance-bonus pool equaled 8.2% of gross payroll; by 2025 it’s 6.9%. Average individual cash bonuses also ticked down from 8% to 7% of salary.
This isn’t simply belt-tightening. It tracks with a healthier talent market: industry median turnover fell from 14.2% (year-end 2022) reported in the 2023 edition to 10.8% (year-end 2024) in the 2025 edition. Less churn means fewer “premium” payouts just to hold people in their seats.
What to do: Right-size your firm’s pool to business reality, but protect upside with a formula that expands when profits expand. Static pools create static effort.
2) Cash dominates, but the mix simplified
Nearly all firms use cash bonuses. The share offering both cash and non-cash dropped from 21% in 2023 to 15% in 2025, suggesting firms trimmed fringe awards and focused on what candidates value most: predictable cash.
What to do: Lead with cash for market competitiveness, then add targeted non-cash (training, credentials, recognition) where it directly advances strategy.
3) Line-of-sight improved at the project level—slowly
A bright spot: project bonuses rose from 18% of firms (2023) to 22% (2025). Both reports note that profitability and individual performance remain the dominant factors, but more firms are inching toward pay mechanics tied to team/project outcomes, where behavior change is clearest.
What to do:
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Define 3–5 project metrics (margin, cash flow, schedule adherence, client satisfaction, safety).
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Pre-set thresholds and split awards across the core team (PM, discipline leads, key contributors).
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Pay quickly after project milestones to reinforce cause-and-effect.
4) Beware the “flat percent of salary” trap
The share of firms using a flat % of salary—unrelated to performance—crept up from 15% to 17%. This is easy to administer but not an incentive plan; it rarely changes behavior because the payout is expected regardless of outcomes.
What to do: If simplicity is the goal, use a hybrid: a small, guaranteed share (for predictability) plus a larger at-risk portion driven by profit/project KPIs.
5) Motivation remains the litmus test
In both 2023 and 2025, roughly one-third of firms say their bonus plan doesn’t truly motivate staff—an admission that design, not dollars, is the limiting factor. The dominant determinants (firm profitability + individual performance) are sound, but motivation requires clarity (people know how to win), line-of-sight (actions link to payouts), and speed (rewards paid close to the result).
A Five-Step Blueprint for Getting Better Results from Your AE Firm's Bonus Program in 2026:
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Start with a target: Start with a target % of payroll (e.g., 6–8%) that scales up with profit above plan and down when profit lags. (2023 median 8.2%; 2025 median 6.9% show the realistic band.)
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Split the pool three ways: firm-wide results (30–40%), project/team performance (30–40%), and individual goals (20–30%).
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Cap the “flat” portion: If you must use a flat %, keep it small; put the rest at risk with measurable KPIs. (PSMJ data cautions against pure flat-percent plans.)
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Make managers the owners of the plan: PMs and unit leaders should recommend awards based on transparent scorecards.
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Audit motivation annually: Ask two questions: Did people know how to earn more? Did timing reinforce behavior? If either answer is “no,” adjust.
Bottom line
2025 brought fewer “retention premiums” and more discipline. Winning firms now anchor bonus dollars to value creation at the project level, keep a clear link to profitability and individual goals, and communicate relentlessly. That’s how you attract candidates who want to win—and give your best people a reason to stay and push for peak performance.
Want to see how your firm compares to industry standards for bonuses and benefits? Add PSMJ’s 2025 AE Bonus & Benefits Benchmark Survey Results to your business intelligence data set. It’s available as both a 386-page PDF report and an Excel-based digital analysis tool that makes it easy to compare your practices to peer firms.