In 2022, bonuses of all kinds reached seven-year highs, as organizations ramped up efforts to attract and retain employees amid post-pandemic economic uncertainty.
This was a main finding from WorldatWork’s “Inventory of Total Rewards Programs and Practices in 2022” survey in partnership with uFlexReward, which found the highest level of bonus activity since the survey began in 2015. Sign-on bonuses were offered by 88% of the 990 organizations surveyed, while 73% of organizations offered spot bonuses and 67% offered retention bonuses.
“The talent market remains hot and sign-on, spot, and retention bonuses are reward mechanisms that can help win and retain key talent in response to economic indicators influencing a tight labor market,” said Alicia Scott-Wears, total rewards and compensation content director at WorldatWork. “Their utility in attracting and retaining talent can be impactful and cost effective when used appropriately to their intention.”
Scott-Wears noted that sign-on bonuses aid in attracting talent, particularly in competitive market environments where potential employees may be receiving multiple offers and are being selective about their workplace of choice. Spot bonuses, she said, can be an effective tool in motivating and encouraging ongoing high performance, which in turn can have a positive impact on retention, as employees who perceive that their contributions are valued by their employer are often more inclined to remain with the company for a longer duration.
Retention bonuses, Scott-Wears said, offer a means to influence key roles within an organization to stay through a particular achievement or timeline such as a project or merger/acquisition.
“There is an element of cost effectiveness in utilizing these bonuses, as these are each a one-time expense versus an ongoing cost into the future with an increase to base pay,” she said. “While not aimed at addressing the long-term, each of these bonuses inject a boost to attraction and retention and it is important to monitor their effectiveness in your organization if you are implementing them.”
Top reported metrics used to measure the effectiveness of these bonuses were “retention/turnover” calculations for sign-on and retention bonuses, and “employee perception/satisfaction” for spot bonuses.
The survey also revealed market-based adjustments returned to pre-pandemic popularity, as they were offered by 82% of organizations surveyed, while hazard pay, which peaked in 2020, dropped back to pre-pandemic levels at 15%.
WorldatWork’s survey also confirmed the continued use of remote and hybrid work arrangements by organizations, as 91% of respondents offered hybrid work in 2022 and 82% confirmed they have employees working remotely 100% of the time.
Other Key Findings:
- Organizations plan to increase flexibility. 50% of organizations plan to increase flexibility incrementally, while 6% plan to increase flexibility significantly and 2% plan to move to complete flexibility (within guardrails).
- Merit increases offered. 91% of organizations surveyed offered performance-based pay increases in 2022, while 82% offered market-based adjustments.
- Short-term incentives offered. 79% of organizations surveyed offered individual performance-based incentives.
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