Large employers are apparently still harboring recession-related reservations about writing big bonus checks, despite difficulties in attracting and retaining top talent.
A survey of representatives of 170 major U.S. companies by Towers Watson finds that the majority of respondents say that they have no plans to fully fund their bonus pools when that magic season rolls around this year. Perhaps they don’t see the relationship between that and the report from two-thirds of them that they can’t recruit top talent and more than half that can’t retain their top performers.
“Employers are continuing to take a conservative approach to funding their bonus pools,” said Laura Sejen, managing director at Towers Watson, who notes that funding for incentive pools is generally tied to a company’s financial performance.
“While most incentive programs are designed to recognize and reward employees for individual performance, the fact that some companies continue to deliver substantial bonuses to weak performers raises questions as to whether they are investing their bonus dollars as effectively as possible or truly holding workers accountable for performance.”
It’s the fifth straight year that employers have said they haven’t fully funded the pools. This time, the average funding was 89 percent, a drop from last year’s 93 percent. Only twice in 10 years has the survey shown employers in this group willing to fully fund their bonus programs.
Yet others say they are going to give bonuses to employees who haven’t meet the bonus criteria. Nearly a third said they would do so this year.
When asked about the bonus levels for top performers and bottom performers, the average response was that the best of the batch receive about 19 percent over average, the lowest performers receive about 65 percent of the average.
“Critical skill” employees are the most difficult to attract and keep, the survey found. These are probably the ones behind the attraction/retention challenges reported by many employers. More than half (53 percent) said they’ve seen an increase in hiring activity, and 40 percent are experiencing increased turnover — indicating that certain workers are able to move around with some ease.
“Attracting critical-skill employees and other key talent has been a real challenge for many employers for several years. However, with hiring activity on the increase and employees more receptive to changing jobs, there is greater competition for talent, making it more difficult for companies to keep their most valued employees. Employers need to ensure they don’t underestimate the role of pay, career advancement opportunities and challenging work in attracting and retaining critical workers,” Sejen said.