How Can We Revamp Our Bonus System to Encourage Employees to Stay Longer?

Hi All,

We have noticed a trend in our organization where employees receive their annual salary increment along with a bonus and then submit their resignation the following day. The bonus is an annual reward they receive for their service to the organization throughout the year. This has been happening for quite some time, with approximately 10 employees following this pattern.

Is there any idea or suggestion from anyone on how we can implement a different kind of bonus system that would encourage employees to stay longer and prevent them from resigning immediately after receiving their bonuses?

Regards,
Madhu

It happens as employees know that they will not get a bonus if they resign early.

We have divided the bonus into two parts: before Holi (for the Oct-March period) & Diwali (for April-Sept.), and Performance Incentive payable in January & July for half-yearly performance.

As suggested by Mamta, you could probably look at half-yearly or quarterly bonuses/incentives.

-Suja

You can link the bonus amount on a quarterly payment and based on his last appraisal rating. You can inform in advance that O rated will get 100%, VG will get only 90%, Good will get only 75%, etc.

Apr to June - Employee need to be part of the system till July 31. July to Sep - Employee need to be part of the system till Oct 31. Oct to Dec - Employee need to be part of the system till Jan 31. Jan to Mar - Employee need to be part of the system till Apr 30.

This way you can differentiate Outstanding from Good performers, and the impact on the business too will be less since there is a quarterly payout, and people who plan not to wait will leave you early (impact management).

Regards

Dear,

If an employee leaves during a financial year after working for 9 months, and requests their bonus for that financial year, what should I do?

Please provide an urgent reply.

Thanks,

I think we are missing out on the important issue of why they are resigning. It can't be just to get a bonus and leave. There must be some other reasons such as better offers, less attachment, or any environmental issues, etc.

I suggest you find this out first - is there any grapevine happening? Then, work on the bonus period.

Best of Luck :)

Hi Madhu,

Please look into the real reason for their resignation and address that. Employees leave the organization for various reasons, one of which could be salary, but there are other factors as well. Therefore, please identify those reasons. One way to do this is by conducting exit interviews. Additionally, consider improving the bonus system; enhancing it would be beneficial. You should consider implementing quarterly performance bonuses. One possible reason for resignations could be that employees feel they have to wait for another year to receive the next bonus, prompting them to seek other job opportunities. This could be a contributing factor. Also, investigate other potential reasons and resolve them.

Regards,
Sumit Kapoor
HR Executive

Hi Madhu,

I agree with Sumit. First of all, you should find out the reason for resigning because it's not just one case, as you mentioned; there are several cases.

Regards, Wasim

I totally agree with Vije, Sumit, and Wasim. 😛 But I guess it's a free market now, and workers are getting more mobile (especially Gen Y and even Gen X are following suit).

Just my 2 cents 💡: Employees are rewarded with bonuses because of their performance in the past year so that they work harder in the next year, right? But even if they leave, it WAS 😃 still their PAST effort that earned them the bonus.

I remember seeing somewhere that good performance appraisal or feedback is important; without it, reward management is futile. 🚫

Well, if the manager had conducted a good performance appraisal, then the 'lousy' 😔 employee would have received a 'lousy' 😢 bonus, and even if he/she leaves, the organization shouldn't feel 'heartache' about the bonus given. Instead, they should feel good that they have improved the company by removing mediocrity from the system.

BUT if the manager had done a good performance appraisal, then the 'good' 😊 employee would have received a 'good' 😁 bonus and most likely would not leave. Should he/she still leave, there are a few things to consider:

1. He got a better offer 😅: Re-look at your organization's C & B (and also your organization's compensable factors) to see if there's anything to be improved. If not, hey, people move on. Even if one day you get a very, very good 😂 offer, I'm sure you'll probably consider it too, right?

2. Could the company have underutilized his/her talent 😰? Perhaps he/she can use it more passionately in another organization.

3. As the old saying goes - "People don't leave the organization, they leave their managers." Yes, the manager was supposed to be 'good' because he gave him/her a fat bonus, but that's where some are mistaken. Not everyone can be controlled or retained by money alone. Just because they can reward money doesn't mean the managers can 'abuse or misuse' the employees. (Yes, blame it on the managers - who else or what else?) 🤜🏼🤛🏼

Payment of bonus is not charity. If an employer is paying bonus, it is mandatory by law, and it should be disbursed within 8 months from the close of the balance sheet. If an employee leaves the company due to other reasons, it needs to be addressed separately.