Organizations affected by workers leaving their jobs during the Great Resignation are seeking the best ways to maintain a full staff and reduce turnover. One option to do this is by offering an employee retention bonus. Continue reading to learn some recommendations for retention bonus best practices, including specific examples and benefits.
An employee retention bonus is a tool used to attract and retain workers within an organization. It is paid to an employee in exchange for staying with the company for a specified time.
These bonuses are lump-sum payments often split into more than one installment in exchange for the employee remaining with the organization and continuing to deliver high-quality work. For example, an employee who received a three-year retention bonus of $30,000 might receive a $10,000 payment at the end of each year, with the final $10,000 paid at the end of year three.
When offered a retention package, employees feel more valued, and their intent to stay (ITS) increases. When ITS increases:
There are two primary reasons employers offer retention incentives:
Expanding on those two reasons, circumstances and examples for which an employer might offer an employee retention bonus include:
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Retention bonus amounts often range from 10% to 25% of an employee’s annual base salary. Factors companies consider when determining retention incentives include:
The reason you are giving a retention bonus will help determine the payment amount as well as the timing. For example, if you need to keep a key employee because their loss will significantly impact your company, the payment will be based on salary and the amount deemed necessary to keep them with the payouts occurring over the next several years. If your goal is to keep someone in a position through a merger or important project, then the payout timing will be based on the estimated end date.
Each retention package you offer should include a retention bonus letter or agreement. Retention bonus agreements provide clarity about the retention payment and expectations and should include:
These employee retention bonus best practices and recommendations will support you in taking a step toward attracting and retaining employees needed in your organization. For additional guidance on employer retention strategies and more, visit iHire’s Employer Resource Center.