It’s a word that will make you perk up during even the dullest of meetings: bonus. An employee bonus is an extra reward or compensation usually tied to performance or special circumstances. Employees may receive bonuses for a job well done, for a holiday, or during their yearly review. The type of bonus we’re hearing about with increasing frequency in this economy is a retention bonus. So what is a retention bonus and how does it work?
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What is Employee Retention?
Retention is a company’s ability to keep employees and lessen turnover within the business. Long-term, happy, and hardworking employees make for a desirable workplace. Maintaining your good employees will benefit your bottom line and have a positive effect on the work environment as a whole. Replacing employees is costly and can be detrimental to a team’s morale, so employee retention is a high priority among managers and HR departments. To retain a high-performing employee in a competitive workplace, or to reward loyal employees before they start looking elsewhere, you might consider offering a retention bonus.
What is a Retention Bonus?
An employee retention bonus is a tool that a business can use to incentivize and encourage employees to stay with the company. If you have an outstanding worker that you want to keep within your company and not lose to a new job offer, then an incentive bonus may help retain them. A retention bonus could be offered as a cash bonus on their next check, an incentive given after a certain benchmark like staying until next year or hitting a sales quota, or additional benefits and perks.
A stay bonus is meant to be a one-time monetary amount that will be given to an employee in return for a commitment that they will stay for a certain amount of time. The bonus can be given at the end of a time allotment or upfront. This can work well when a business has experienced some employee loss and can’t afford to lose more employees.
Do You Need A Retention Bonus?
You need a retention bonus if
- You can't afford to lose your highest performers
- You're realizing you need to be more competitive in the market
- You're noticing a lack of engagement in your workplace
- You recently lost a well-liked or high-impact employee
Why Offer a Retention Bonus?
A job retention bonus will show good faith on your part as an employer that you want to keep them at the company and that you want them to feel appreciated for their dedication. Offering your employee a bonus will give them an incentive to stay and to continue offering their highest level of effort.
Also, a retention bonus may help your staff member reconsider leaving when the time period for the bonus is up. Giving an employee a bonus will display loyal actions behind your words and that their worth is being seen by management.
The Cons of a Retention Bonus
There are some factors to consider when giving an employee a retention bonus. Although the bonus will show your key employee that you want them to stay, there could be a downside to that bonus. Before giving a lump sum to your employee, consider the following:
- Will it even work?
You may spend time coming up with a bonus incentive plan to retain an employee, and they will either turn down the offer or take the bonus and still leave when the time period attached to that bonus is up. It may be worth the risk, or you may need to consider alternative methods to retain the employee (or offer the bonus to other employees).
- Money may not even be a factor for the employee
As the owner or manager of a company, you have to think of compensation for your employees, but not every situation can be solved with money. If your employee is unhappy and is set on leaving, money may not sway them to stay. On the other hand, improved benefits might be worth far more than a cash bonus.
- A bonus will not fix the issue at hand
If you have a team member who is unhappy, bored, or not working well with other team members but fantastic at their job, and you want them to stay, you may consider a retention bonus. However, if all of these underlying issues are bigger than you realize, they may still be there even with a bonus. A big question to consider is: is it worth the money to keep this worker? If the problem is their work situation or lack of satisfaction with their job title or responsibilities
- Other employees may try to stay to get a bonus that you would rather leave
People talk, and if your other employees have learned that a coworker was offered a retention bonus to stay on the job, they may remain in hopes of getting that same bonus. You could even have workers who you would rather leave the company to decide to stay because of this bonus. Certain team members may not work to the level you want that feel they deserve a reward. It could potentially put your business in a tricky situation. Carefully offer bonuses with the understanding that it could change the experience for other employees.
- The bonus could trigger feelings of entitlement
You may think you know your employees, but if you don’t know them as well as you think and then offer them a lump sum as a bonus, it could change their behavior in the workplace. Entitlement is a real challenge in some workplaces, and if you incentivize your employee to stay, they may feel that they are superior to their coworkers because of that money.
Alternative Bonus Methods
Keeping your employees happy at your company should start before you feel that they are going to leave. Making a retention plan for current employees from the start of their employment will help alleviate turnover rates. Beginning at the onboarding process, there are ways to help your workers see that they are in the right place and will be happy here. Instead of doing a large check, you could consider different types of bonus structures that your employee will love:
Access to a Divvy Card
If you are not using a Divvy card with your employees, then you should consider adopting this expense management/employee enablement tool. A Divvy card is like a company credit card where you can set the limit being used each month. You can give your employees access to purchase educational items, equipment needed to do their jobs, and money to use on their internet or phone bills. Small, regular stipends combined with the trust of a company card can speak volumes to employees.
Purchase Snacks for the Office
A small but incredible gesture for your team is to supply daily snacks for your workers. They will love knowing that they can go into the break room and grab a snack or a drink whenever they need it and know that their fantastic company supplied that for them. It is a small gesture on your part but will ultimately become a reason they do not want to leave the company.
Paid Time Off
Most businesses have a plan for when an employee wants to go on vacation or needs sick days. But if you use that plan as a retention tool, you can reward your workers while giving them another reason to stay with your business.
- Consider giving them extra paid time off outside the allotted amount you have set
- Give them their birthday off each year
- Allow managers to choose an extra day each month or per quarter for their team to take off
- Tack an extra day onto a holiday break
- Make the jump to unlimited PTO
This can be an incredibly effective way to reward your employees and make your offerings more competitive. Let’s face it—they’re not going to leave for a job with LESS PTO.
Consider Non-Monetary Retention Tools
Retention strategies that involve money are a great plan, but there are ways to support and retain employees without spending or giving money. Try some of these retention strategies that do not involve money:
An effective employee retention strategy is to offer regular training. Ask your employees about training they’d like to receive or tuition programs they’d dive into. Depending on the type of company you are running, there are various topics to choose from. You can offer training on new software or even the best customer service practices. Make these pieces of training a regular thing (i.e., monthly or bi-monthly). Be sure to attend the training; it is an added bonus for them to see their manager learning alongside them and keep their skills sharpened. Not only will you benefit from your staff learning new skills, but it will help give them a break from the workday and support professional development.
The environment will play a factor in retention. Creating a great atmosphere to work in will set up your company for success. As an owner or manager of a company, you can ensure that your staff has the best equipment needed to do their best work; this can be done for those in the office or at home. If your team is currently working on-site, give them a comfortable workspace in a great location. If the office is clean, your employees are given their own space and are located in a good area, and your staff will enjoy coming to work.
If you have remote employees, be sure they are given the proper equipment to perform their best. Ensuring that their environment is good, even from home, will help alleviate employee turnover.
It is common to meet with your employees and provide feedback about their performance, but do you do that yourself? Let your staff give you feedback whenever they feel it is appropriate. Some great ways to offer open communication are:
- Change the narrative and let your employees tell you how you, as the owner or manager, can improve in your role or in the workplace.
- Give your workers an open line of communication and let them know that it is ok to come to you with complaints or suggestions.
- If your company has a human resource department, let them know they can always talk to them as well.
None of these options will work if your employees don’t trust you, so make sure you are leading by example.
Get a Retention Bonus Plan in Place
If you are concerned that you will start losing employees, then work with human resources and get a bonus plan put into place. Try to pinpoint things to look for with your workers who are considering leaving. Some signs to look for in team members that may consider moving to a different job are:
- They are taking more days off
- They are not participating as actively as they have in the past
- You can see a shift in attitude
- Long term projects don’t seem as big of a priority
- They seem more isolated than they have in the past
- They are not concerned with issues in the company
If you notice any of these issues arise, then talk to your human resource department and consider the pros and cons of using a bonus agreement to keep this employee at the company. If there is already a retention plan in place, then this will help your discussion with that worker go smoothly and will be something that the company has planned for.
As employers, you have the means to make some changes in your company to either build a retention bonus plan or practice key strategies from the beginning to stop high employee turnover. Staff members will know and appreciate that you are putting them first and that you are willing to work with them to keep them at your place of business and happy.