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British firms are putting employee motivation and business costs at risk by failing to rein in their bonus schemes, it has been claimed.

According to the Chartered Institute of Personnel and Development (CIPD) two-thirds of companies have no coherent reward strategy.

Of the proportion that does have an annual bonus strategy, only 55 per cent evaluate it on a yearly basis and three-quarters fail to link benefits to their own business results.

Charles Cotton, pay and benefits adviser at the trade association, suggests that increased competition from overseas firms was leading to British businesses playing loose with their bonuses.

"While the pressure is on to cut costs there is also the demand for better quality goods and services," he said.

"This increases the pressure on pay and benefit specialists to manage the forces pushing costs down and the upward cost pressures so that stakeholders are satisfied and so that the organisation succeeds in attracting, retaining and motivating talent."

Mr Cotton insists that the CIPD survey shows that UK firms are making the "wrong decision" and wasting time and money on benefits by failing to measure their effectiveness.

"Human resources and reward professionals should investigate measures, such as customer satisfaction and line manager feedback, to show the real value such packages can have on all areas of the business," he concluded.