Merry Gratuity

Howard biren may be the president of his 88-unit brooklyn cooperative, but it's the superintendent who runs the building. Time and again, the super has proven to be the linchpin - taking on repair jobs himself and finding ways to cut costs, saving the co-op thousands of dollars in the process. Recently, the cooperative renovated the lobby, and the super "did most of the labor," says Biren.

While the building pays the super extra for his hard work, this year the board decided to say "thank you" in style, with a $2,000-plus bonus at the holidays. While that figure may not seem out of place in a luxury co-op in Manhattan, it is on the high side for this neighborhood. But the tip comes with a point. "We want him to stay," says the president. "He's that good."

Welcome to Diplomacy 101 - determining the holiday gratuity

Despite all the potential complications, and the seemingly ongoing recession, an increasing number of buildings are giving their staffs holiday bonuses. Part of it is tradition, part of it is graciousness, and part of it is just enlightened self-interest. "What I advise buildings, in general, to do is to be as generous as possible, especially with staff members that are cherished and respected. They can make or break a building," says Eugene Andrews, president of Andrews Building Management.

The best way for boards to look at the holiday gratuity is as icing on a cake. It may only be a gesture, but the greater the care the board takes, the longer the gesture will be savored by the staff.

For some boards, deciding on an appropriate gratuity is uncomplicated. The board appreciates the hard work of the super, and/or porter, and/or handyman, and is especially keen to retain his/her/their services. Then, there are other, more complex scenarios, where the employees number in the dozens; where shareholders are expected to provide the lion's share of holiday contributions; and, perhaps most awkward of all, where employees have done the bare minimum and still expect a cash "thank you" every winter. With all that to consider, how, then, do you go about determining the right gratuity?

THE PROCESS

The first thing you should do is realize that there is a difference between a tip and a bonus. Mary Ann Rothman, executive director of the Council of New York Cooperatives & Condominiums, offers this definition: shareholders tip, boards give bonuses. "A bonus is an amount determined by the employer and will be treated as any other taxable income," she explains. Occasionally, a bonus can be considered a condition of employment. On the other hand, tipping is something shareholders do at their discretion.

The process starts with research into the particulars of your property. "Every building has a history that's very, very different," observes John Sicree, director of management for Brown Harris Stevens. "Most buildings only give bonuses to the superintendent, and part of the bonus depends on what salary the man makes."

One way for a board to determine what to give is for the board members to talk with their neighbors. Don't be shy, says Arthur Davis, a co-op consultant. "Ask." Indeed, a board should be sure to get feedback from the shareholders during the year on how the staff has performed. In most buildings, employees will be more prompt to respond to complaints registered by board members than shareholders. "It shouldn't be that way, but it is a lot of times," says Davis. So the board has to use the shareholders' experience as a barometer of what's really happening in the building.

Some have made the procedure even more formal. Richard Koral, director of the Apartment House Institute, lives in a 250-unit co-op which has a committee of shareholders that determines how much money to collect from each unit. Last year, the fee was $40. The money is collected, and, then, dispersed among the buildings' eight employees according to a formula of responsibility: the super gets a third, and the remainder is divided on a sliding scale among the handymen and porters. "It gets a little complicated," admits Koral, "but it works well." The reason it's done that way "is that we do not want tenants vying with each other for the favors of the maintenance staff."

The manager can also be a big help in this sort of research. Helping boards figure out what to give is part of his job, notes Michael Berenson, a property manager with AKAM Management. "We try to make it as easy as possible for the board. We do an evaluation of the building [employees], from the porter to the handyman to the super."

The evaluation includes "how the employees have done for the year, and anything above and beyond the call of duty." When reviewing employees' work, the manager solicits the input from the building's super and residential manager. Then, AKAM prepares a spreadsheet for the board on what it has given each employee in bonuses over the past two years, with its recommendations for the current year.

Such an approach can streamline the process, and also remove a lot of the emotions that can surround the evaluation. And, while every building is different, there are some familiar strains that appear every year.

In Sicree's experience, most buildings distinguish between the super and all the other employees, with the super getting a bonus, and the other employees getting tips at the holidays from individual shareholders. "It's common that people tip the staff, but bonuses out of the building fund are unusual." At his buildings, says Andrews, boards distinguish among the super, porter, and handyman, and give bonuses to all three.

There is also the problem of employees who habitually get overlooked, such as the doormen who work late at night or early in the morning, or members of the maintenance crew who don't have the same high profile as other employees, such as the day doormen and the super.

"The sad thing is that the most visible employees get the most," says Guy Smiley, president of the 360-unit Sovereign at East 58th Street. "The people who probably get the short end of the stick are the doormen who work from midnight to 6 A.M., who are not seen by that many people, and some of the maintenance crew."

FORMULAS FOR YOU

After considering all those factors, how do you then come up with the appropriate bonuses? The wisest boards sit down well ahead of the holidays to figure out a formula for giving, based on factors ranging from the length of an employee's tenure, his or her general cooperativeness, and how hard the employee has worked during the year. The whole process is "highly individualized," one co-op consultant points out, with boards taking into consideration what they have given in the past, their hopes for keeping the employee on staff, and whether the employee has gone above and beyond the call of duty.

Different buildings have used different formulas to navigate among solutions to the problem. Take, for example, the Sovereign. With more than 30 full-time employees, all of them union members, "the board doesn't give any bonuses or perks," says the president, Guy Smiley. Rather, at the holidays, "What we do is send out a list of their names and job descriptions to all the members of the co-op and they each determine what they want to give."

In the seven years that he has lived in the building, four of them serving on the board, the system seems to have worked well, says the president, who estimates that roughly two-thirds of the cooperators pitch in with gratuities for the staff.

Anita Sapirman, president of Saparn Realty, has been in the business of real estate property management for more than 30 years. Over that time, she has watched boards develop formulas for giving and seen the super bonuses in particular pick up.

"Most of my buildings give a week's salary - but it varies," she says. "If it's a substantial building and the super has been a long-term super and does an excellent job, there is a great reward for that superintendent at holiday time. And they do receive many thousands of dollars," sometimes as much as $4,000 or $5,000.

Adds Berenson: "For doormen and porters, what you will see many boards do is give from half a week's salary to a full week's salary," which can range from $100 to $600. In turn, "A super in a nice white-glove building can get from $1,000 to $5,000."

For those supers who go above and beyond the call of duty, such as coordinating a lobby renovation - a major coordination project - the numbers can climb again. Sapirman has seen supers get as much as $10,000; other management executives report a top rate of $12,000. And that, they all agree, is only if the super has been "remarkable," saving the building a great deal of money and performing a lot of work that would normally be done by contractors or consultants.

The evaluation process can become very emotional, warns Steve Miller, president of Plymouth Management. When board members begin calling him, asking for recommendations on what to give, he has to judge the building and the employees before answering. In general, believes Miller, a "reasonable" super shouldn't get less than $50 per apartment, "and it would go up from there, depending on how you felt." A doorman should get a little less, but again, it would depend on the situation.

"My advice to buildings - sometimes followed, sometimes not - is that I like them [the super and other key building employees] to have $2,500 in their pocket," as a gratuity at the holidays, says Andrews. He also recommends his boards pay the taxes on the bonuses, as a further symbolic gesture.

TAXES

Whatever boards choose to do in determining how to give employees as holiday bonus: whether they decide the board should do it, or they leave it in the hands of the individual shareholders, they need to be mindful that as the numbers add up, it's possible that the Internal Revenue Service (IRS) will become involved.

A few hundred dollars in cash for the super in a self-managed building in Brooklyn probably won't attract a lot of notice during an audit. But when the numbers reach into the thousands, boards are running a risk that it will turn up on an audit.

"The technical rule is that if it's additional income, it is subject to withholdings," points out Charles Zucker, a principal with the accounting firm Zucker & Shernicoff. "I've seen supers get three-, four-, five-thousand dollars that should be reported on their W-2s," but wasn't. His accountants prepare a memo and let the building know that they have to be withholding for taxes, but at the end of the day, it's up to the board to decide whether to run the risk of getting caught. Warns Zucker: "There have been audits in the past by the IRS. They didn't look for that item, but they could have. And it doesn't mean they don't do it in the future."

The simplest thing to do is to err on the side of safety. "My own advice to boards is: don't pay it in cash, do tax it, and pay it in a check," says Bruce Cholst, a partner with the law firm Rosen & Livingston. "Pay it as if you were paying salary and deduct and withhold." The process should revolve around a board making the all-important decision on whether an employee merits a bonus. "And then they can write a note to the shareholders and remind them that tipping is a matter of their own discretion. That way, in effect, you are reminding them that tipping might be appropriate, but you are not pressuring them."

JUST ONE MORE THING

Plan early. Many property managers say they start talking with their boards well before the holidays, encouraging them to set aside time to think about what they want to give the staff, and, if they are going to suggest that shareholders also give tips, to allow the shareholders enough time to decide what they want to give.

"Whatever you do, you don't want to wake up on December 21 and say, 'What should we be doing?' You should have 11 months of molding and shaping what someone's dollar value is," maintains Davis.

Miller says his company generally begins talking to boards in November, encouraging them to start thinking about the holiday bonus. The amount "depends on the level of the service" performed by the building employees, and whether they have gone above and beyond their usual duties to make operations run smoothly. "We usually look at what was done in the previous year, and decide whether to go up or down depending on the level of service [and] the level of satisfaction that the board feels."

Whatever board members decide to do, however, they need to understand what the gratuity represents, and give themselves time to make a thoughtful decision. Although it's tempting to use the carrot-and-stick approach, that rarely works. To get an employee to do a satisfactory job, a board needs to invest its own time and effort. And that can be undone with a poorly thought-out holiday bonus.

"You have to get an employee to produce through effort and time, and then if they don't produce, you have to censure or dismiss them." But punishment via the bonus is "not appropriate," maintains Andrews. "To me, it just makes for an angry disgruntled employee."

At the 369-unit Excelsior, shareholders live in one of the most luxuriously appointed buildings in the city. And the shareholders who benefit from all the luxury are expected to reply in kind at the holidays.

"We get a Christmas list, and everyone is tipped individually, based on seniority and how long they have been there," explains one shareholder. Over the years, an unofficial scale has been created for the 100 employees: the super, doormen, concierges, and garage attendants receive between $75 and $100 per unit, and everyone else gets less, depending on their jobs. "It's a lot," agrees the shareholder, who estimates that last holiday season she gave about $2,500 in holiday gratuities.

And, even though tipping is considered voluntary, there is a tacit understanding both by the board members and the building's crew that everyone should be giving. "You get a guideline and make your own decisions, but, believe me, if you don't make a good one, people aren't too happy with you," stresses the shareholder. Not that anything severe happens, but the quid pro quo is clear. "It's like what happens when you don't tip the hairdresser well enough. You have a hard time getting an appointment next time."

"It's certainly a strong New York tradition to give the building staff a gratuity," concludes Plymouth's Miller. Adds CNYC's Rothman: "[It] is a nice way to say 'thank you' to the building staff for all the service you get during the year."