To be a successful business in 2024, employers need to shift focus back on their employees and prioritize on reducing turnover, improving employee engagement and experience, and ultimately better employee retention.
Employee Retention Bonuses & Other Retention Methods
From the “Great Resignation” to "Quiet Quitting" and the "Great Layoffs", the job market has not been the greatest. In today's economy, it is important for companies to focus on retaining their top talent and continue to enhance employee productivity and morale.
Why can’t employers retain their employees?
In a world altered by the COVID-19 pandemic, providing a good employee experience is all the more difficult. There are things that many workers look for in jobs that used to never matter, such as remote or hybrid work, something that certain employers can’t even offer.
Fostering a great employee experience is the primary factor in retaining top talent for a business. That begins with creating value for the idea of staying put for employees and potential new hires.
What Is a Retention Bonus?
A retention bonus is a monetary reward that an employee earns by working for a company for a certain agreed-upon amount of time. Businesses commonly use them during mergers, acquisitions, crucial production periods, or sometimes as an incentive to hire and retain new employees.
Why Do Companies Give a Retention Bonus?
When an employer decides to implement a retention bonus, an employee agrees with the employer to stay with the company for a specified period of time in exchange for a monetary bonus. Employers should ask the employee to sign a contract to agree to terms.
The U.S. Securities and Exchange Commission has an example of a “stay bonus” contract (employee retention bonus contract) on their site.
Employee Retention Bonus Examples
Bonuses are typically paid in either one large lump sum, or occasionally employers will pay in regular installments. The bonus is typically offered as a percentage.
For example, a 10% retention bonus for an employee who makes $124,000 a year would be $12,400.
Employee Retention Bonus Structure
Taxes are applied to retention bonuses through either the percentage method or the aggregate method.
Percentage Method
Using the percentage method, bonuses are taxed at a flat rate of 22%. Bonuses of over $1 million are taxed at 37%. These are the standard supplemental wage tax rate for 2024 under the IRS.
Aggregate Method
Alternatively using the aggregate method, employers must add the bonuses to concurrently paid wages and withhold federal income tax as if the total compensation (wages + bonus) were a single payment for a regular payroll period.
If there are no concurrently paid wages, add the bonuses to either the regular wages paid or to be paid for the current payroll period or the regular wages paid for the preceding payroll period
Other Methods of Employee Retention
While retention bonuses are a great way to keep top-performing employees, employers can't always afford to offer them to everyone. So it is important to improve the employee experience in as many ways as possible.
Mentorship Programs
Implementing mentorship programs and peer-matching programs are a great way to begin fostering the employee experience right from the beginning. Not only will employers cut down the time it takes to turn a new hire into a productive employee, but they’ll help these employees build relationships with their coworkers, netting extra team chemistry.
Focus on Company Culture and Leadership
Creating a positive and inclusive workplace culture and having inspiring leaders can maximize employee engagement and is a critical key to retaining your top talent. Having an engaged workforce can provide companies with a competitive advantage over other employers, as well as gives employees a reason to not only stay but come to work as well.
Employers should review their mission, vision, and values and incorporate them throughout their organizational practices in order to create a company culture that maximizes employee retention and talent attraction.
Statistics prove that investing in your management team, leadership, and company culture is essential to retaining employees.
Nurture Employee Wellness
Now more than ever, employees look for an employer that cares about their wellness, and general well-being. While this used to refer more to physical wellness, mental health is now of even more importance.
Offering mental health services, gym memberships, and other similar benefits is a great way to nurture employee wellness.
Reward Effort Not Just Results
Employers need to make sure that their employees feel appreciated and valued. A good way to show appreciation is to reward employees for effort, in addition to results. Sometimes an employee can give 110%, but their results don’t yield correlated success.
Show these employees that they are appreciated for their effort all the same, or they will begin to give less effort as time goes on, and eventually leave for a new job.
Have Fun
Employers should make their business a fun place to work. Having a simple pizza party for lunch one day can do wonders to boost morale. Even better, a team outing to perhaps an arcade or go-kart track can do wonders for team building.
A happy employee is the best kind of employee. A happy employee also sees no reason to leave.
Find Out Why People Leave When They Do
Even if an employer offers great retention bonuses, and puts time into all of the above methods of retention, there are always going to be employees who decide to leave.
It is important to conduct exit interviews and find out what troubled the employee to the point of departure. The only true fool-proof method to improving employee retention is to find out exactly what is causing employees to leave, and address it.
Final Thoughts on Employee Retention
Employee retention can be a difficult thing to master on your own. If you are a Connecticut employer, or any employer looking for help with employee retention and giving your workers a great employee experience then perhaps an HR consulting service provider can be of help.
Contact us today and find out how we are already helping countless businesses retain their top performers for their company.
