Retention bonuses have proven to be a useful tool in persuading employees to stay.
A retention bonus plan is not a panacea. According to a survey, non-management employees generally receive about 10 percent of their annual salaries in bonuses, while management and top-level supervisors earn an additional 50 percent of their annual salaries. While bonuses based on salary percentages are the generally used, some companies choose to pay a flat figure. In some companies, bonuses range from 25 percent to 50 percent of annual salary, depending on position, tenure and other factors. Employees are chosen for retention bonuses based on their contributions to management and the generation of revenue. Retention bonuses are generally vary from position to position and are paid in one lump sum at the time of termination. However, some companies pay in installments as on when the business cycle completes.
A retention period can run somewhere between six months to three years. It can also run for a particular project. A project has its own life span. As long as the project gets completed, the employees who have worked hard on it are entitled to receive the retention bonus. For example, the implementation of a system may take 18 months, so a retention bonus will be offered after 20 months.
Although retention bonuses are becoming more common everywhere, some industries are more likely than others to offer them. Retail/wholesale companies are the most appropriate to implement stay-pay bonuses, followed by financial service providers and manufacturing firms. Companies of all sizes use retention bonus plans to keep knowledge employees retained in the company. To retain its key senior employees post merger with EDS Corporation, Mphasis is providing cash component based retention bonus plan for its employees. This is mainly to retain good employees and provide them a cash incentive to keep them motivated.
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