WorldatWork Retention Bonus Survey

May 2002

Retention Bonuses Up, Survey Finds

The need to use cash incentives to retain employees can obviously become paramount when, as was the case in the late 1990s, the labor market is extremely tight and employers get into bidding wars to lure the employees of competitors. But retention bonuses are not just useful and necessary in tight labor markets. Indeed, when economic conditions soften and companies begin to struggle or face reorganization, retaining key employees can mean the difference between success and failure.

It was in the latter environment, in mid-2002, that WorldatWork re-fielded a Retention Bonus Survey instrument that had previously been fielded to members in the very tight, March 2000, labor market.

Interestingly, the 2002 survey data indicates a slightly higher prevalence of retention bonus in the more difficult market conditions. In 2000, about 24% of the 650 WorldatWork members who responded to the survey reported having a retention bonus program in place. In May 2002, however, 34% of the 772 members indicated their organization has a retention bonus program.

The different economic environments of 2000 and 2002 might explain the difference in payment practices of retention awards. In 2000, 75% of respondents said that payments were made as lump sums, but in 2002 that figure was reduced to 65%, perhaps reflecting the need in 2000 to put cash in people’s pockets quickly to get them to not think about another offer, versus the need in 2002 to give cash at an interval or on a time schedule.

When asked in the May 2002 survey about the primary goal of the retention bonus program, the highest response (25%) indicated the bonuses were used to “retain key employees during organizational restructure.” The second most common response, at 18%, was “ensure long-term organizational continuity.” Finally, in response to the question of whether or not the retention bonus program is an effective tool in retaining top talent, 84% of respondents in 2002 indicated in the affirmative.

1. Does your organization award cash retention bonuses?

34%	Yes (skip to 1b)
66%	No (skip to 1a)

1a . If no, is your organization currently considering implementing a retention bonus program?

8%	Yes (skip to submit)
92%	No (skip to submit)

1b. Have you implemented your retention bonus in the past 12 months?

45%	Yes
55%	No

2. Is your retention bonus program:

42%	Formal with defined eligibility criteria and rules or guidelines
58%	Based on management discretion

3. Which of the following employee groups are eligible to receive cash retention bonuses? (Check all that apply.)

67%	Executives
71%	Upper Management
71%	Middle Management
58%	Supervisors
72%	Professional Staff
42%	Sales
66%	IT Staff
60%	Technical Staff
33%	Administrative Staff (nonexempt)
18%	Part-time employees

4. What length of service is required for employees to become eligible to participate in the retention bonus program?

	Not tied to length of service	Total tied to length of service	< 90 Days	90 days - 6 mos	6 mos - 1 yr	>1 yr
	% of all respondents		% of those tied to length of service
Executives	79%	21%	22%	5%	19%	54%
Upper Management	80%	20%	24%	5%	16%	54%
Middle Management	81%	19%	19%	6%	19%	56%
Supervisors	82%	18%	21%	4%	21%	54%
Professional Staff	86%	14%	43%	13%	35%	9%
Sales	87%	13%	14%	0%	21%	64%
IT Staff	79%	21%	19%	8%	19%	53%
Technical Staff	78%	22%	29%	9%	14%	49%
Administrative Staff (nonexempt)	70%	30%	15%	12%	23%	50%
Part-time employees	70%	30%	29%	0%	7%	64%

5. What are the goals of your organization's cash retention bonus program? (Please check all that apply.)

52%	Ensure long-term organizational continuity
33%	Help maintain market competitiveness
7%	Recover ROI for employee training
3%	Recover ROI for employee education/tuition
15%	Retain key employees at the top of the salary scale
58%	Retain key employees during organizational restructure
5%	Retain key employees in case of bankruptcy
41%	Retain key employees in merger and/or acquisition
41%	Retain organizational intellectual capital
30%	Reward project completion
14%	Other, please specify

6. What is the primary goal of your cash retention bonus program?

18%	Ensure long-term organizational continuity
8%	Help maintain market competitiveness
1%	Recover ROI for employee training
0%	Recover ROI for employee education/tuition
3%	Retain key employees at the top of the salary scale
25%	Retain key employees during organizational restructure
2%	Retain key employees in case of bankruptcy
12%	Retain key employees in merger and/or acquisition
17%	Retain organizational intellectual capital
4%	Reward project completion
11%	Other, please specify

7. What type of payment method is used for the cash retention bonus?

	Lump Sum	Regular Intervals	Progressive Timing
Executives	63%	23%	14%
Upper Management	65%	22%	13%
Middle Management	66%	22%	12%
Supervisors	69%	18%	13%
Professional Staff	66%	20%	14%
Sales	64%	21%	15%
IT Staff	64%	20%	16%
Technical Staff	64%	19%	16%
Administrative Staff (nonexempt)	69%	15%	15%
Part-time employees	59%	26%	15%

8. When the cash retention bonus is calculated, what is it based on?

	Flat dollar amount	Percent of base salary	Combination	Mgmt Discretion
Executives	16%	28%	16%	40%
Upper Management	16%	29%	16%	39%
Middle Management	16%	30%	17%	38%
Supervisors	14%	31%	18%	37%
Professional Staff	20%	28%	18%	34%
Sales	14%	25%	16%	45%
IT Staff	19%	30%	16%	35%
Technical Staff	21%	30%	18%	31%
Administrative Staff (nonexempt)	24%	29%	18%	29%
Part-time employees	21%	25%	17%	38%

9. What is the actual dollar amount, on average, as a percent of base pay?

	Cannot be reconciled	Total that can be reconciled	0-5.99%	6.0-9.99%	10.0-20.0%	>20.0%
	% of all respondents		% of those that can be reconciled
Executives	34%	66%	5%	7%	25%	63%
Upper Management	33%	67%	7%	10%	36%	48%
Middle Management	32%	68%	8%	10%	52%	30%
Supervisors	33%	67%	12%	17%	48%	22%
Professional Staff	35%	65%	12%	17%	53%	18%
Sales	41%	59%	13%	13%	47%	28%
IT Staff	33%	67%	12%	23%	50%	14%
Technical Staff	33%	67%	14%	25%	44%	18%
Administrative Staff (nonexempt)	40%	60%	35%	24%	31%	10%
Part-time employees	36%	64%	41%	24%	28%	7%

10. Do you feel your retention bonus program is an effective tool in retaining top talent?

84%	Yes (skip to submit)
16%	No

11. If no, why do you feel it is not an effective tool?

18%	Amount awarded is too low
23%	Lack of communication to managers
64%	Other, please specify

	Respondent Demographics

	Industry
12%	Manufacturing
5%	Wholesale/Retail Trade
6%	Finance/Banking
6%	Insurance
2%	Service - Non Profit
6%	Healthcare
8%	High Tech
5%	Governemnt
5%	Business Services
2%	Transportation
3%	Utilities
1%	Oil/Gas/Natural Resources
3%	Education Services
1%	Construction/Real Estate
1%	Publishing/Newspaper
3%	Communications
12%	Other


	Company Size
29%	<1,000
27%	1,000-5,000
23%	5,000-10,000
21%	10,000+