The anticipation of high job gains and low unemployment rate in 2022 will lead employers to increase compensation incentives, such as bonuses, to be more competitive in hiring and retaining top talents.
Economists who participated in the recent Federal Reserve Bank of Philadelphia’s survey are expecting jobs to grow at a monthly rate of 430,900 in 2022, while unemployment is expected to go down from 4% in Q1 to 3.5% by Q4 – matching 2020 pre-pandemic unemployment rate.
The Conference Board’s (TCB) VP of Labor Market Research, Gad Levanon, said, “When US unemployment reached 14.8% in April 2020, few could have predicted the widespread difficulties in hiring less than 18 months later. Yet the demographic factors that drove labor shortages before the pandemic have returned with a vengeance. Coupled with reopening pains and reordered expectations around wages and the workplace, employers are facing a historic mismatch between their demand for labor and the available supply.”
With these tight labor market conditions, economists say that employers who are proactive in providing creative incentives, such as bonuses, will be in a better standing to attract and hold onto top workers.
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How are employers using bonuses?
In a U.S. workplace study conducted by WorldatWork, the 4 most common types of bonuses that are offered by employers include Sign-on, Retention, Referral, and Spot Bonuses.
- SIGN-ON BONUSES
Sign-on bonuses are fixed funds added to the salary and other predetermined compensation such as commission or performance-based wage raises during the job offer stage. These funds are usually used to entice the candidate to sign the offer quicker or to provide leverage from competing offers. Typically, sign-on bonuses are contingent on working for the employer for a set amount of period, commonly 6 months to a year. If the worker does not stay within the agreed-upon period, the bonus must be forfeited or returned.
WorldatWork said that of the four types of bonuses, sign-on bonuses are the most prevalent (79%) among the 957 survey participants, and roughly half have increased (52%) the number of sign-on bonuses awarded in the past 12 months.
These findings are similar to the analysis made by TCB of over 40,000 online job advertisements, which revealed that job postings that mention sign-on bonuses have more than doubled between the start of the pandemic and October 2021.
- RETENTION BONUSES
Retention Bonuses often given to employees who have worked within the company for a significant amount of time, or to high-performing employees to prevent them from “jumping ship” to a new job. These funds are typically added on top of annual, performance-based wage raises. Among the WorldatWork’s survey participants, 57% reported using retention bonuses. To not lose workers to rival companies, 49% of organizations have increased the budgeted number of employees who receive retention bonuses and 30% have increased the amount of the bonuses. Of the employers who do not offer retention bonus programs, 22% said they are considering implementing one.
- REFERRAL BONUSES
Current employees are an underutilized source for recruiting new hires since many of these workers have people within their network or social circles with similar professional backgrounds. Businesses can tap into these networks and use their current employees as advocates to fill vacancies by providing Referral Bonuses. These bonuses are usually awarded after the referral gets hired.
WorldatWork reported that referral bonuses jumped from 65% in 2016 to 75% in 2021, which was the greatest increase among all four bonus types. One-third of those that already offer this program offers higher bonus amounts for hard-to-fill positions, while 2% offer a higher amount when the referral comes from an under-represented population to improve the company’s diversity initiatives.
- SPOT BONUSES
A spot bonus is typically paid “on the spot” to individuals or a group of employees who delivered exceptional work performances. These compensations are on top of their activity-based commissions or wage raises.
From the WorldatWork Survey: 61% of organizations use spot bonuses regularly. Of those who regularly track its effectiveness, 81% see improvements in the employees’ job satisfaction and 74% reported better workforce productivity.
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In this current market where competition in hiring and retaining high-skilled workers is very stiff, it is rare to find an organization that does not offer any bonus programs. Out of the 957 who participated in the WorldatWork survey, only 7% said they do not give bonuses to their workers.
If you are curious to see if there are engineering jobs that offer higher compensation and bonuses than the one you already have, chat with one of SoloPoint Solutions’ recruiters today! We can scout for new opportunities for you that meet your target compensation. Call us at (408)246-5945 or check out our Job Board to see our current opportunities.