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Talent & Recruitment
Are Retention Bonuses Worth the Investment?
Aug 25, 2014 | The Canadian Professional Sales Association lock

Due to the increased demand for sufficiently educated and trained employees, more and more employers are offering retention bonuses in an effort to retain best and brightest in their field. What impact does this have?  Are they a worthwhile investment, or should companies avoid them entirely? Let’s examine retention bonuses, including a brief examination of when they are appropriate, as well as potential advantages and disadvantages for the employee and employer.  

There is a Time and Place for Retention Bonuses

Retention bonuses are necessary when a company desperately needs to retain their best employees.  In today’s sales landscape, employees have the ability to move from one job to another with ease.  A retention bonus can be used to control this problem.  In addition, it is a great tool to use when a department or project is being slowly shut down.  By offering retention bonuses, a company can make certain they have enough people to see the project through to the very end.  As well, a company that is struggling to maintain top industry standing may see retention bonuses as an ideal way to keep much needed staff members with them during the hard times. 

Providing a retention bonus can potentially save companies money.  Rather than spending funds recruiting and training new staff members, companies can direct money toward bonuses.  Likewise, retention bonuses are a method of compensating an employee who has mastered new skills or completed additional training.

Advantages Associated With Retention Bonuses

The primary benefit of giving retention bonuses is that it allows an employer to be certain they retain much needed employees, at least for a specific time period.  In addition, it decreases the costs related to hiring and training new employees.  For employees, it is a great bonus to their regular income and acts as a reminder of how much the company values their hard work.  

Disadvantages Associated With Retention Bonuses

It’s important to note that retention bonuses come with no guarantee as to how a person will perform while working.  It also does not ensure that an employee will stay with a company for any longer than the specified time detailed in the bonus.  In addition, if word gets out within the company that some employees are being paid retention bonuses, while others are not, it will likely result in animosity.  For any company considering offering retention bonuses, these are consequences they must consider before making a final decision.  

Are Retention Bonuses Worth it?

This is really dependent on the unique situation of the organization in question.  For some companies going through a merger or experiencing a down period, this may be the only way to safeguard key employees.  Of course, there is also the chance that the same key employees might not be swayed by a retention bonus and opt to move to a company that offers them a hiring bonus instead.

On the other hand, a retention bonus only ensures loyalty, not performance.  If an employee receives a retention bonus, they may not be motivated to work as hard because the company has already shown that they feel he or she is somewhat indispensable.  Simply put, they have no incentive driving them to perform if they know their position is already secure, even if it is for just a short period of time.

With the constant demand for quality employees in the sales industry, there is a continual need to maintain your top performers.  Prior to implementing retention bonuses, remember to weigh the advantages and disadvantages against your current situation.

About the Canadian Professional Sales Association
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Copyright ©2014 by The Canadian Professional Sales Association
For permissions, contact editor@cpsa.com.

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