Retention, Signing-Bonus Programs Make Strong Comebacks

By Larry Reynolds  

Spurred by the prospect of an improving economy, sign-on and retention-bonus programs are at an all-time high, Rose Stanley, a total rewards practice leader at WorldatWork, told Bloomberg BNA July 30.

“The uptick in sign-on and retention-bonus programs may indicate that the war for key talent could be heating up as the economy improves, leading to an increased focus on attracting and retaining key talent,” she said.

More companies are offering sign-on bonuses and paying them at higher rates, with executives receiving the greatest amount, said the June 2014 WorldatWork report, “Bonus Programs and Practices.”

“Companies simply have more money to spend now,” Stanley said. However, companies are being strategic about how they spend this money, she said.

Although referral bonuses remain important, companies appear to be focusing their strategies on attraction, retention and recognition through spot bonuses, Stanley said.

“Employers are using one-time sign-on and retention bonuses to attract and retain the talent that they need, rather than add to their long-term payroll costs with merit raises. They are targeting spot bonuses as an additional means to recognize employees that are excelling when other forms of cash compensation have been restricted,” Stanley said.

Although most worker categories are eligible to receive retention bonuses, clerical employees are the least likely to receive a bonus, according to the WorldatWork report, which summarized a March survey of WorldatWork members regarding trends in bonus programs and practices.

 “Usage of sign-on bonus programs are at an all-time high of 74 percent in 2014,” which is a statistically significant higher rate than in all other previous survey years, the report said. “Additionally, retention-bonus programs are also used at statistically significantly higher rates (51 percent) over all previous years,” it said.

“Referral-bonus programs have actually slipped from most prevalent program in 2010 to second most prevalent behind sign-on bonus programs,” the report said, noting that 63 percent of employers in 2014 compared with 60 percent of employers in 2010 are using referral-bonus programs, whereas 74 percent of employers in 2014 compared with 54 percent of employers in 2010 are using sign-on bonus programs.

Sign-on and retention bonus programs are at an all-time high, a survey found.

In 2014, 29 percent of companies used all four bonus types: spot, referral, sign-on and retention bonuses, which is a 20 percent increase from 2010, the report said.

“This may be a sign of an increased strategy to use different means to recognize talent,” Stanley said.

Sign-On Bonuses

Sixty-six percent of companies pay the sign-on bonus in one payment, the WorldatWork report said. Most other companies wait one year after hiring to pay the signing bonus, the report said.

Executive-level employees receive the largest sign-on bonuses, with 26 percent of companies paying from $10,000 to $24,999, 21 percent paying from $25,000 to $49,999 and 41 percent paying more than $50,000, the report said.

Supervisors, professionals, sales and information technology employees generally receive bonuses from $5,000 to $9,999, the report said. Technical and clerical employees receive bonuses from $1,000 to $4,999, it said.

More than one-third of middle-management employees receive bonuses from $5,000 to $9,999, and about one-third receive bonuses from $10,000 to $24,999, the report said. Forty percent of companies pay upper management from $10,000 to $24,999, the report said.

Referral Bonuses

Referral bonuses are common for most positions, but 33 percent of companies allow executives to receive referral bonuses, the report said.

Seventy-two percent of companies pay the referral bonus in one payment, the report said. The remaining companies split the referral bonus so that some is paid immediately and the remainder after a set period of time, most often from one-and-one-half months to six months after hiring, it said.

The bonus for referring candidates in all position levels except for clerical positions is from $1,000 to $2,499, the report said. For clerical positions, 33 percent of referral bonuses are from $500 to $999, it said.

Retention Bonuses

Seventy percent of companies rely on management discretion when deciding to offer a retention bonus to keep an employee with the company, the report said. The remaining companies use some type of formal eligibility criteria and guidelines, it said.

Sixty percent of companies indicated that the number of retention bonuses awarded during the past 12 months has stayed about the same, 16 percent said they have seen a decrease and 24 percent indicated an increase, the report said. “A flat dollar amount is the most common calculation method, in use at over one-third of participating organizations,” it said.

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