New Report Outlines How U.S. Organizations Use Bonuses as a TR Tool

Nearly all U.S. organizations are using bonuses as a total rewards vehicle. More organizations are compensating employees when they refer a job candidate that eventually joins the team. And, fewer organizations are offering bonuses to get a new worker to accept a job offer.

These are among the findings of WorldatWork’s recently released 2024 Bonus Programs & Practices research report, which outlines how organizations across the U.S. are using various bonus practices (e.g., sign-on, performance, retention, referral, spot) to attract, retain and reward members of their workforce. This is the sixth edition of WorldatWork’s research on bonuses and the first report on this subject since 2021.

For the new report, WorldatWork surveyed professionals at 706 U.S. organizations, representing a wide range of industries and employment sizes. Report focus areas include:

The reemergence of pre-pandemic bonus trends;
The integration of bonuses into marketing strategies for talent attraction; and,
The limited evaluation of bonus program effectiveness.

Additional coverage includes:

Changes in bonus budgeting, eligibility and payout structures;
Expanded tracking of performance bonuses; and,
Refined questions for clearer data collection.

Workspan Daily (WD) connected with Liz Supinski, WorldatWork’s director of research and insights, to discuss some of the findings from the new research and their impact on total rewards professionals.

WD: What jumps out from this research? Why is this going to be important to total rewards pros and a point of conversation within organizations in the weeks and months ahead?

Supinski: While perhaps not groundbreaking, a big takeaway is that bonus programs have continued to grow in importance and have become a key element in total compensation strategy for most organizations. A historically tight labor market drives demand for techniques to attract and retain employees, while continued economic uncertainty may make bonus programs more appealing to organizations than pay increases, which represent ongoing costs.

In this year’s study, 98% of participating organizations had at least one bonus program. In addition, this year, many aspects of bonus programs have come in at levels we would have anticipated based on trends seen from 2010 to 2016, suggesting that some of the changes documented in the 2021 Bonus Programs & Practices report represented adaptations to pandemic-era disruption rather than an enduring evolution of bonus programs.

WD: As you referenced, the 2024 research is WorldatWork’s first take on Bonus Programs & Practices since 2021 — and just the second related report since 2016. What are people going to find that is new in this survey report

Supinski: We’ve added some information on performance bonuses to help round out the bonus picture, with more details on performance bonus programs to be added in future iterations of this study given their high prevalence. Otherwise, much of what is new is really evolutionary change in bonus programs, as organizations converge on effective approaches to using bonuses as a part of total compensation.

WD: What does the research show has changed over the past three years? How have bonus practices evolved during this time and what do you see as the root cause(s) of any identified changes?

Supinski: Four big changes come to mind. These are in regard to sign-on bonuses, referral bonuses, spot bonuses and retention bonuses.

Regarding sign-on bonuses, their use as a standard recruiting feature and to cover bonus forfeiture has decreased by nearly 25% since 2021. During the pandemic recovery, sign-on bonuses for hourly service workers — primarily in the retail and restaurant sectors — were widely used as a standard recruiting feature. An easing labor market and increases in minimum wage, particularly in California, have likely decreased usage of this tactic for this segment. Covering bonus forfeiture is a tactic used in many industries at the executive level and for professional staff, especially in the tech sector. A cooling market, particularly for Big Tech, likely has made those less necessary.

For referral bonuses, more than three-fourths of organizations now use them, marking a slight increase since 2021 and a 15% rise compared to pre-pandemic levels. Though the labor market has eased, it’s still tight by historic standards. Also, the effectiveness of referral programs has become more broadly acknowledged over the past five years or so, as research [by WorldatWork and other entities] has shown referral programs can lead to faster hiring, reduced hiring costs and better retention among new hires.

For spot bonuses, these have maintained moderate popularity, as they are used by about 60% of organizations. There has been a notable decline in the use of spot bonuses for special recognition (e.g., training completion, patent achievements, cost savings). Since 2021, this usage has decreased by 4%, and by nearly 10% from pre-pandemic levels. Despite this, 81% of organizations with spot bonus programs still award them for special recognition. The observed shifts may reflect changes in recognition practices due to the rise of remote work.

Finally, for retention bonuses, these are now offered by 66% of participating organizations, marking an 8% increase from 2021 and a 21% rise from pre-pandemic levels. However, they may have reached a saturation point, as only 9% of the organizations not using them are considering adding them. Again, a historically tight labor market drives demand for techniques to attract and retain employees, while continued economic uncertainty makes bonuses a safer choice for organization than pay increases.

WD: In examining this 66-page report, what are a few of the data points that really stand out to you — whether because they are important or emblematic or just plain surprising?

Supinski: Some of the previously mentioned data points would be at the top of my list. They reflect some of the greatest changes in each area and are also emblematic of the way economic conditions can make different elements of total rewards more effective for organizations at certain points in time. Beyond that, another broad theme we see here, as well as other areas we research, is there are missed opportunities in organizations to move beyond program implementation. They could achieve greater return on investment in bonus programs by putting in place robust evaluation methods and ensuring that programs are communicated effectively.

WD: The report shares three key findings and four bonus findings. Can you talk about the report’s content structure to give readers an understanding of the kind of information they will find?

Supinski: Our goal with this report was to provide general context for the trends in bonus programs broadly as well as what is changing among each type of bonus. The narrative focuses on changing practices. The appendix, though, provides detailed findings on the implementation of each kind of bonus program that organizations should find helpful in benchmarking their existing programs or developing new bonus programs that are competitive with those in place in other organizations.

For instance, organizations interested in sign-on bonuses can see why other organizations are awarding these bonuses, which employees are eligible for them, whether they are a defined or undefined dollar amount for each employee category, and how much is paid. Additional details include whether payouts are split, the specifics of forfeiture provisions of these programs and how organizations measure program effectiveness. So, major trends aside, there is really rich data here for evaluating and building bonus programs.

WD: How can organizations internalize this report and apply some of the findings within their total rewards programs?

Supinski: This report includes a practitioner recommendations section that calls out some key opportunities for organizations to make the most of their bonus programs. As in many other areas of total rewards, as programs mature, it’s important for organizations to go beyond the basics of implementation and ensure they are making the most of their program investments. This report can help in that regard.

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics: