Companies are always looking for the latest way to retain employees. How about a $50,000 bonus for employees after they’ve been with your organization for five (5) years?
CNN recently covered a company named SIB Development and Consulting and their idea about how to improve their retention of employees:
Dan Schneider, founder and CEO of SIB Development and Consulting in Charleston, S.C., is offering $50,000 bonuses to any of his full-time employees who stay with his company for five years.
“In this day and age, there is nothing that makes people loyal to companies anymore,” said Schneider. However, a $50,000 retention incentive can change that, he said.”
Is this a gimmicky ploy or is it something that could actually work?
Multi-year retention bonuses?
For someone who follows the world of professional sports, things like bonuses for being on the team after a certain amount of years aren’t an oddity. But in the world of business, most people view retention on a year-by-year basis, at least when it comes to compensation.
If you are working for a typical company and receive a yearly bonus, it is probably at the end of the calendar or fiscal year. And in order to get it, you need to be there through the mutually agreed-upon time period to cash in. If you’re a recruiter, you’ve probably had headaches from trying to recruit a candidate who had a bonus due in a month or two and who wanted to collect.
This system works okay. As a competing recruiter, you hope it doesn’t get in the way of a placement. And if you’re an HR person for that organization, you probably see turnover slow down before the bonus period deadline, and then resume at a more hurried pace afterward. That’s how it goes.
But does it impact retention that well?
The $5o,ooo question
To be fair, SIB hasn’t had to pay out anyone yet. The company is only three years old and it will still be several years before they pay anyone the big money.
But $50K is a big chunk, and setting it at five years to collect is an interesting tactic. For a younger employee, could you imagine investing five years at a company and getting a bonus that could significantly pay down some student loans, or maybe serve as a down payment on a house?
Having that bonus at the end of five years is a big carrot. And maybe a logical view is getting a $10K bonus every year for five years would actually be better, but it certainly doesn’t have the same ring as that bigger number down the road.
Of course, there are a couple of bigger considerations before you jump into straight into a program like this.
Problems? What problems?
I think this could work for you and your organization if you’re willing to accept a few risks:
- You’re still going to have short term turnover issues. If you rely on this program to solve your turnover woes, it will definitely take care of mid-term turnover. For employees who have been with you for less than a couple of years, that’s not enough an investment to feel like the $50K bonus is within reach.
- You have to be comfortable pushing people out. You might have an employee who is at your company and is trying to stick it out because they are in their fourth year and want that bonus. But if they aren’t pulling their weight, you have to be willing to deal with the fallout of coaching a person who has more than a job to lose.
- How many people are you keeping after five years? Maybe you’re okay with a five-year employee, and if everybody worked five years and then left, you’d still be excited. But the principle behind it and then the realities of replacing your staff after five years is not going to be great.
- It doesn’t fix culture. Just like any retention program, this $50K bonus isn’t a silver bullet. The best companies top retention tool is how it goes in the day-to-day workplace. But beyond being a good employer, programs like this can help differentiate similar employers in a space.
Even with these disadvantages, I still think a system like this is going to work better than your standard, year-to-year bonus as a retention tool. I think it is easier to retain key people over the mid-term and, maybe most importantly, it is extremely different than anything out there.
And more than anything, the discussion on retention needs to continue to evolve beyond standard techniques.