This has become an increasingly popular question as we enter a new era in the workforce (and employees continue to have the upperhand in the market): Do employees prefer a lump sum bonus they can access up front, or would they rather see an increase in their salary?
Employees’ views of desired compensation are changing.
As a result of the pandemic, there are major transformations taking place in the workforce – remote work, increased work life balance, quiet quitting, side hustles, etc. And these changes have inspired an internal discussion for many about their professional worth and if they’re being properly valued by their employer.
On Team Bonus – it seems that the answer lies within the data. According to a survey by talent acquisition company LHH, 69% of employers plan to offer bonuses for existing employees and 40% have increased the amount for sign-on bonuses for new employees. This tells us that not only are employers seeing employee trends and working hard to keep current employees happy and engaged, they’re also trying to stand out for prospective employees during the hiring process.
For Team Raise – it will always be a welcome (read: expected) reward to employees, but it won’t necessarily help them generate long-term wealth or financial freedom. Data from The Conference Board shows the median salary increase for employees across the country was 3% in 2021. For a person that makes $75,000 annually, an average raise would be a $2,250 bump – or an additional $43 per week. This increase won’t make a dent in debt, student loans, investment accounts, or a down payment.
What if that were a bonus instead, a lump sum of $2,250 that could be accessed immediately? That lump sum could help an employee get ahead on a few monthly payments, pay down debt or create the famous “emergency fund”.
Beyond the monetary value, there’s also the psychological benefits when it comes to providing a bonus over an annual raise. A 2014 study by the American Accounting Association found that a bonus can have a positive impact on an employee’s performance, and how they feel about their employer. It found that a signing bonus brought forth more effort by an employee and improved how much they trust their employer. It has also been found that offering a raise in pay could end up backfiring. A Joblist survey says 72% of people who were offered a raise from their employer believed that they could still be making more money elsewhere, even with the bump in pay. That could lead to more turnover, as employees consider other options.
Employers know that a bonus is attractive to employees. It’s evident when you look around the job market at newly posted jobs on sites like Monster or Indeed. A London-based labor analytics company says there was a 454% increase in job postings that featured sign-on bonuses from 2020 to 2021.
So why not take the traditional bonus one step further and ensure it provides a return for your company? By tying bonuses to employee retention and even performance, it’s a win win for both the employer and the employee.
This is why Keep Financial exists. A vesting cash bonus shows employees they are valued, rewarded, invested – and committed – in the company. Raises may not keep employees, but a substantial bonus that is earned over time just might.