‘Cash is king': Upfront bonus is tied to recruitment and retention
As employees grapple with student debt, housing costs and inflation, companies have an opportunity to get cash-creative to help employees grow their net worth while ensuring they retain their best workers.
Recruitment and retention have been top of mind for employers since the pandemic disrupted the workplace. It turns out that one of the best incentives may be cold, hard cash.
Nearly nine in 10 employees would take an extra cash bonus in exchange for time commitment at their company, the Effective Compensation Study Report from Keep Financial found. In addition, three-fourths of respondents who receive stock options or other equity said they would rather receive all or a portion of that equity as cash today in exchange for a time commitment.
“The survey shows us that cash is king for employees and comes right as many companies seek to revamp compensation and retention strategies,” said Rob Frohwein, cofounder and CEO of Keep Financial. “However, for employers to be effective in meeting employees’ needs, they must also ensure that the corporate object of retention is met.”
A 2022 Pew Research Center survey found that low pay (63%), no opportunities for advancement (63%) and feeling disrespected at work (57%) were the top reasons why Americans quit their jobs in 2021. As of January, there were roughly six jobseekers for every 10 openings, or nearly two open positions for every available worker. Finding and retaining top talent has always been a priority, but for many employers, the challenge of building a talented workforce has been exacerbated by the events of recent years.
Today’s employers have an opportunity to offer innovative compensation packages that deliver retention of top employees while helping them reach both short- and long-term financial goals. The report explores how employees would view a lump-sum cash bonus tied to retention, how they would use that cash and how it compares to other incentives, such as stock options or other equity.
Related: A 3-step financial wellness framework: Help employees take action toward financial goals
When asked how they would use a lump-sum cash bonus payment, respondents listed paying off debt (44%), saving for retirement (40%), starting an emergency fund (28%) and saving for a down payment on a home (21%) as the priorities.
The results suggest that upfront cash bonuses are a desirable benefit that can give companies a competitive edge when recruiting or retaining key employees. This feedback comes at a critical time, because McKinsey found that people are voluntarily leaving their jobs at a 25% higher rate than they were before the pandemic. In today’s competitive market, employers must listen to the needs of the workforce and focus on offering flexible compensation plans designed to help employees achieve their personal financial goals, Frohwein said.
“Compensation options have been static for decades,” he said. “As employees increasingly grapple with student debt, increasing housing costs and inflation, companies have an opportunity to get cash-creative to help employees grow their net worth while ensuring they retain their best workers to boost productivity and the bottom line.”