Keeping Your Talent Onboard: The Rise of Retention Bonuses
Keeping talent onboard and loyal in this hiring boom climate requires a carefully crafted strategy for employee retention. Could retention bonuses be the key?
Say hello to one of the hottest job markets in a long time — great for candidates, challenging for companies seeking to retain and hire top talent.
American workers are quitting their jobs more than any other time in the past two decades in record numbers. The speed of recovery from the pandemic slump may have taken some organizations by surprise. It’s hard to comprehend the incredible resurgence in job opportunities, given that about a year ago, the United States was in a fragile state. Millions had lost their jobs. Dread of a bleak future hung heavy. But now everything is changing — and it’s moving fasssssssst.
Businesses looking to keep top talent happy in this competitive and complex labor market have to look to new tactics to succeed in this environment.
You may be accustomed to hearing about signing bonuses, typically in the realm of professional sports or white-collar executive roles. But in today’s juggernaut job market, truck drivers, office cleaning staff, pizza delivery people, and even warehouse workers are being offered signing bonuses of hundreds (and even thousands) of dollars. According to a recent piece in the Wall Street Journal, “nearly 20% of all jobs posted on job search site ZipRecruiter in June offer a signing bonus, up from 2% of jobs advertised on the job search site in March.” To say that the job market is hot may be understating it.
And for businesses looking to retain talent before the brinkmanship of counteroffers?
Given what is happening, companies that want to function optimally need to ensure that their workforce is engaged, well-nourished, and committed to their job to succeed in this increasingly complex climate. Essentially — if your competition is increasingly doling out signing bonuses, it’s time to up the ante and offer top talent retention bonuses, that is, if you don’t want them to leave.
Packages vary — but typically represent lump sum payouts that a company offers as a reward to an employee as well as to provide incentive to stay for a specific amount of time. Amounts vary but are usually based on a percentage of the worker’s salary, role within the company, and length of time they agree to remain. Historically offered during stressful times for an organization, such as a merger, acquisition, or critical production period — today, this economic tool is increasingly being leveraged to keep competitors from poaching valued employees and help ensure a solid working foundation for the company in these topsy-turvy times.
A recent CBS News piece shared that the surge and frequency of bonuses signal that companies are doing more to hire and retain workers amid the current labor crunch. Employees are quitting their jobs in record numbers to take higher-paying roles elsewhere or follow a personal, professional dream.
Make this your 2021 maxim: retain > replace.
Studies show that employers spend more to replace a valued team member than to offer economic and other incentives to retain them. The estimated cost for employee turnover can be as high as 90% to 200% of the role’s annual salary — and this does not consider the indirect costs related to the learning curve the new employee will have to overcome.
While Madison Wells benefits from the focus companies put on recruiting top talent, we want the top talent we place to be happy in their professional homes long-term. In this amped-up labor market, emphasizing retaining current employees is just a smart (and economically sound) strategy.
Companies may also benefit in the following ways by offering retention bonuses:
- Enhance loyalty among employees – Bonuses can help keep employees happy and loyal to the company for years. When workers are compensated for their time and expertise, they are more invested in seeing the company succeed.
- Boosts morale – Additional compensation shows employees their work is valued and motivates even higher levels of performance.
- Improves job satisfaction – Employees who feel appreciated are more likely to take pride in a job well done.
- Demonstrates investment in experience – Talent that has honed their skills throughout the years should be justly rewarded for their higher level of productivity.
- Rewards performance – While retention bonuses are not necessarily performance-based, it signals that an employee is excelling at their job.
If you are looking to retain top talent at your company in this particular market but having limited success, take a cold, hard look at your retention practices and see where you can sweeten the pot — a little may go a long way towards short + long term organizational success.