Return of the Bonus

By Michael J. O'Brien/Talent Management Columnist

Bonuses are back!

At least that's according to a new WorldatWork survey, titled Bonus Programs and Practices, which finds 74 percent of 811 members polled reporting the use of sign-on bonuses in their organizations in 2014, up from 54 percent in 2010.

Similarly, the survey from the Scottsdale, Ariz.-based nonprofit HR association found spot bonuses rose from 43 percent in 2010 to 60 percent in 2014, and retention bonuses jumped from 25 percent in 2010 to 51 percent in 2014. (Referral bonuses also saw a slight uptick from 2010 to 2014, rising from 60 percent to 63 percent.)

Rose M. Stanley, total rewards practice leader at WorldatWork, believes the uptick indicates the war for key talent is heating up as the economy improves.

The fact that all types of bonuses rose by such wide margins in the survey "was a big surprise," she says.

"To have them come back up, that can be expected," she says, "but they were significantly up."

Stanley views the rise as a sign organizations are concerned they won't be able to attract the talent they need, and, once they're aboard, entice them to stay.

"Over the past five to six years," she says, "the money lever has not been pulled very hard. Organizations may be working on creating nice work environments and development opportunities for their workers, but they also have to take a look at bonuses."

John Bremen, managing director at Towers Watson's Chicago office, who previously served on WorldatWork's compensation advisory committee, says he's not surprised by the survey results.

"Overall, the labor markets are still not as tight as they were in 2008," he says. "People assume the war for talent is over. But ... companies are having just as difficult a time attracting critical talent as they were before the downturn. Even though it may be 'easier' to find rank-and-file employees now, it's actually as difficult to find certain specialized roles as it was before 2008."

The survey also found the average number of bonus programs offered by organizations is now three -- up from 2010's average of two.

Alan Johnson, managing director of Johnson Associates, a compensation consulting firm in New York, says the increase is just another sign of growing organizational complexity.

"These companies have gotten so big that you've got different businesses and geographies, so you need different bonus programs," he says. "And having separate plans makes the plans better, but it also makes it clear what's going on. It helps to explain [how bonuses are distributed] both to participants and the board."

In the end, though, the way an organization utilizes bonuses is a reflection of the company's understanding of complex issues, says Bremen.

"As companies become more sophisticated," he says, "so do their workforces, and their bonus programs need to be, as well."

Perhaps failure to heed such sage advice could seriously imperil any HR executive's hope of getting a fat bonus of his or her own.

Michael J. O'Brien can be reached at mobrien@lrp.com.

 

Jul 21, 2014
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