Turnover bonus

Retention bonuses can be taxed using the aggregate tax method or the percentage tax method.

Top forex bonuses

What is a Retention Bonus, turnover bonus.

Usually, the aggregate tax method produces a higher tax rate than the percentage tax method, but that is dependent on the actual figures involved. It is best to consult a tax professional when determining the best way to manage your retention bonus. Employers must consider why they are giving the retention bonus to determine the amount given. If the goal is to keep the employee from going to work for a competitor, then the competitor's salary will contribute to the amount of the retention bonus. If a company wants to keep an employee on for the duration of a challenging project, they should consider the amount of extra time an employee will be expected to work as well as the overall value of the project. Additionally, a company must consider how much money they have available to offer the employee a lump sum.

What is a retention bonus?

Businesses sometimes need a tool to entice key employees to remain with the company. Retention bonuses can motivate employees to stay with their business. Many factors contribute to the efficacy of retention bonuses.

In this article, we will discuss what a retention bonus is, how retention bonuses work, whether or not retention bonuses are considered income and the benefits of retention bonuses.

What is a retention bonus?

A retention bonus, also called retention pay or a retention package, is a lump sum of money a company pays to an employee to stay with the company for a specific amount of time. Usually, retention bonuses are sizable amounts of money, ranging from 10% to 25% of an employee's base pay. The time the employee agrees to remain in the company's employ depends on the nature of the package.

Retention bonuses are most common in large companies with over 20,000 employees. Companies across all industries offer retention bonuses, usually to top-level or key employees. Companies generally offer retention bonuses during a stressful time for the company, such as a merger, acquisition, during a large project or a critical period of production. Increasingly, companies offer these bonuses to keep competitors from poaching valuable employees.

How does a retention bonus work?

Retention bonuses are not tied directly to work performance. Instead, they are an incentive to remain with the company. Generally, companies create a contract specifying how long the employee will remain with the company in exchange for the amount of the bonus. The amount of time an employee is expected to stay depends on the needs of the company, but it is rarely an indefinite amount of time. Employees receive the bonus as either a lump sum or divided over the period indicated in the contract.

The amount of the retention bonus depends on several factors, such as the reason for the retention bonus, competitor's salaries and the company's finances. The average retention bonus is between 10-15% of an employee's base income, but the amount can go up to 25%.

Employers must consider why they are giving the retention bonus to determine the amount given. If the goal is to keep the employee from going to work for a competitor, then the competitor's salary will contribute to the amount of the retention bonus. If a company wants to keep an employee on for the duration of a challenging project, they should consider the amount of extra time an employee will be expected to work as well as the overall value of the project. Additionally, a company must consider how much money they have available to offer the employee a lump sum.

When companies offer a retention bonus, is a retention bonus income?

As an employee, accepting a retention bonus comes with tax implications. Retention bonuses are considered supplemental wages. Supplemental wages are any compensation in addition to an employee's regular pay.

While a retention bonus is not considered part of an employee's salary, it is still considered income and part of total gross pay by the IRS. As such, it must be reported as income on your yearly taxes.

Retention bonuses can be taxed using the aggregate tax method or the percentage tax method. Usually, the aggregate tax method produces a higher tax rate than the percentage tax method, but that is dependent on the actual figures involved. It is best to consult a tax professional when determining the best way to manage your retention bonus.

The aggregate tax method combines the retention bonus total with your yearly salary. The tax rate is then figured using this total. The tax rate is calculated on your W-4 form.

The percentage tax method calculates a flat tax rate of 25% of the bonus. If the retention bonus is over one million dollars, then it is taxed at a rate of 39.6%. For example, if your retention bonus was 1.3 million dollars, then $300,000 would be taxed at 39.6% and one million dollars would be taxed at 25%.

Benefits of retention bonuses

Retention bonuses can be a useful tool for companies looking to keep key individuals or top-level workers in their employ. There are many possible benefits of offering retention bonuses for businesses:

Increased productivity

Although retention bonuses are not directly tied to work performance, employees may still work harder or increase productivity due to the bonus.

Company loyalty

If an employee accepts a retention bonus and signs a contract to remain with the company, that employee is unlikely to leave before the end of the contract. This can help a company establish longer-term loyalty.

Reliable workforce

Retention bonuses can help establish a reliable group of employees during a challenging time for the company, such as a merger or a high production push. This, in turn, can increase overall profits as the company knows there will people working.

Improved morale

Employees will probably feel appreciated and valued by the company when offered a retention bonus. High morale can go a long way in improving overall long-term retention with or without bonuses.

Consistency to outsiders

Maintaining key employees or top-level executives during a difficult time for the company can be valuable to external stakeholders like investors. Keeping a consistent team in place could keep investors from withdrawing support during a time of company transition.

One-time payment

A retention bonus is a one-time payment. This can be a great way to incentivize employees to stay with the company and reward them for their commitment to the business but not raise overall salary costs. This is especially true during company transitions.

Keep highly trained employees

Retention bonuses can be used to keep employees who recently completed training or continuing education from taking their skills to a competitor.

What is employee turnover and employee retention?

When we talk about employee turnover, we mean the number of employees who leave an organization over a specified timeframe, typically one year. On the other hand, employee retention is number of employees an organization keeps during a given period.

Many companies track turnover closely because it can be a huge cost to replace employees. Like customer retention, investment in employee retention has a higher return than investment in acquisition.

Retention is also a key sign of employee sentiment and engagement—it can even be a competitive advantage! After all, when a company is hemorrhaging employees, that’s typically a sign of something wrong. Compare this to a company with a team with a proven history of skills, knowledge, and relationships built long term within the company.

Which company would you rather work for or invest in?

That’s what we thought, too. ��

But before we dive deeper into the who, where, and when of turnover and retention, let’s clear up some definitions.

Glossary of terms

Retention is the percentage of employees who stay at an organization over a set period. It can also be measured in terms of the average or median tenure; the number of years that employees remain with an employer.

Turnover is the percentage of employees who leave an organization over a set period. It is often reported monthly and annually.

��you may also hear terms like attrition, churn, or separations for turnover. Attrition can sometimes be used to refer to voluntary turnover, often in the context of a hiring freeze where employees leaving through natural attrition are not replaced in order to reduce the size of the workforce.

Voluntary turnover is when the employee decides to end the employment relationship—it’s the employee’s choice to leave. Generally, the primary focus of retention efforts is to reduce these resignations.

Retirement is technically voluntary turnover, however companies often report retirement rates separately because they are not a focus for reducing turnover.

�� you may also hear terms like quits, exits, departures, or leaves for voluntary turnover.

Involuntary turnover is when the employer decides to end the employment relationship—the employee did not choose to leave. This could be for reasons of poor performance or a layoff due to redundancies.

�� you may also hear terms like terminations or discharges for involuntary turnover.

More recently, employers are paying more attention to the following quality-of-attrition metrics, which report the attrition rates of “high quality” employees.

Healthy turnover is when ending the employment relationship is best for both the employee and employer. It could be when a project ends or there is just a poor fit.

In fact, helping employees understand their own strengths, needs, and preferences—in addition to clear expectations and accountability—can help them voluntarily leave when they’re not able to perform optimally or if they’re unhappy. An employee consistently performing at a low quality or having a toxic attitude impacts the whole team, and letting them go might be best for the long-term health of your company.

�� you may also hear terms like non-regrettable or functional turnover.

Regrettable turnover is when an employer loses an employee important to its business.

This generally includes employees identified as high performers or high potentials. It also relates to how big an impact they make when they leave, typically because they had a lot of intellectual capital, many direct reports who relied on them, or critical skills that will be difficult to replace.

�� you may also hear terms like unhealthy or dysfunctional turnover.

Avoidable turnover is when the reasons an employee left were within an employer’s control or influence.

An unavoidable departure may be an employee moving with their spouse, whereas an avoidable departure could be an employee taking a similar job at another company because they offer more flexibility in schedule.

While all types of turnover have some cost to the company, the critical focus for retention strategies is to reduce avoidable and regrettable turnover to as close to zero as possible.

Who is responsible for turnover?

Managers tend to have the biggest impact on retention and face the most immediate consequences when someone leaves their team.

That said, it is often the senior leadership team or HR who is responsible for tracking and reporting turnover. These groups may also work together on wider efforts to reduce turnover.

And overall, every member of an organization can influence and benefit from retaining the people needed to fulfill the organization’s purpose.

Where do I find my company’s turnover and associate cost?

First, you need company data on headcount and the number of people who left the company in a given time period. The general formula is:

Employee turnover rate as a percentage = (total number of employees who left in time period / average number of employees in time period) * 100.

If you don’t have access or can’t request this information, then you may need to partner with those who can report and influence this area. For example, you may be a manager speaking to an executive about the value of sharing the company’s turnover and developing a strategy around it.

As a manager, it can be valuable enough to pay attention to the turnover in your own team, where you have more information and influence. You will also have more insight into which turnover has been voluntary, regrettable, and avoidable.

If you have access to an HR information system (HRIS) or human capital management (HCM) software, then you may find categories like voluntary and involuntary turnover are already being tracked.

Or, you may spot an opportunity to leverage technology (and excel spreadsheets count as technology here, too!) to better track the types of turnover for better insights and decisions.

To find out how much turnover costs your organization each year, try our cost of employee turnover calculator.

When should we pay attention to retention?

Retention may not always be the organization’s priority if your best people never leave for unavoidable reasons. Even if this is the case for you, though, retention is a competitive advantage that you will want to monitor and nurture.

From the very first employee-employer interaction, likely the job application, you have an opportunity to build a culture of commitment. Every aspect of the candidate and employee experience can help you keep the people who make your organization successful.

Why should I care about retention?

You’re in luck—our next chapter exclusively covers this question. Read on to find out!

Plus, if you’re looking for a quick way to start improving employee engagement, we invite you to take a tour of the platform and join us for a demo.

Retention bonus

What is a retention bonus?

A retention bonus is a targeted payment or reward outside of an employee's regular salary that is offered as an incentive to keep a key employee on the job during a particularly crucial business cycle, such as a merger or acquisition, or during a crucial production period. This payment, meant to keep an employee from leaving their position, is typically a one-time payment.

In recent years, retention bonuses have become increasingly popular as corporate poaching has increased.

Understanding retention bonuses

When an organization is going through a disruptive period of organizational change, it offers financial incentives to senior executives and key employees to persuade them to stay with the company until it becomes stable. The financial incentive is referred to as a retention bonus.

During a merger, restructure, or reorganization, a company will attempt to retain its best employees to make certain that it has enough people working in the company during the challenging times. For example, a business that is shutting down a department or project will offer retention bonuses to its best performers to ensure that it has the much-needed employees to see the project through to the end.

Booming economies and liquid labor markets

In a booming economy in which employees are being offered and sold attractive job benefits from other companies, the probability of a business losing its valuable employees to competitors is high. With the corporate landscape changing almost daily and a liquid labor market allowing workers to move from job to job more easily, retention bonuses have provided a great way for companies to keep key employees.

In addition, employees who have obtained new skills or completed training that is vital to the operations of a business may be offered retention bonuses to ensure that they do not take their skills elsewhere.

A retention bonus is typically a one-time payment made to an employee. Companies usually prefer to offer a retention bonus instead of a salary increase because they may not have the necessary finances in place to commit to a permanent salary raise.

Depending on the company, the value of an employee’s retention bonus may be tied to the employee’s length of service with the firm. The bonus is paid at the end of a period as either a percentage of the employee’s current salary or a lump sum of money. For example, if a project will take 12 months to be completely shut down, the employee retention bonus will be paid after 15 months to ensure that the employee stays for the remaining life of the project.

Key takeaways

A retention bonus is a targeted one-time payment or reward outside of an employee's regular salary that is offered as an incentive to keep a key employee on the job.

When an organization is going through a disruptive period of organizational change, it offers financial incentives to senior executives and key employees to persuade them to stay with the company until it becomes stable.

Key employees may also be offered a retention bonus if their employer suspects they may be looking to leave to a competitor in order to keep them.

Special considerations: tax treatment of retention bonuses

The IRS treats all bonuses, including retention bonuses, as supplemental wages. Supplemental wage is defined simply as compensation paid in addition to the employee’s regular wages. Taxes are usually applied to a retention bonus using either the aggregate method or the percentage method.

Under the percentage method, bonuses are separated from the employee's salary and taxed a flat rate of 22% directly. If the bonus amount is over $1 million, then it will be taxed 37% (or the highest income tax rate for that year). If an employee received $1.2 million as a retention bonus in 2020, $200,000 would be taxed at 37%, and $1 million would be taxed the regular 22% rate.

The aggregate method is used when the employer withholds tax by combining the retention bonus with the employee’s regular salary into a single payment. The tax rate used is found in the withholding table, which is based on information submitted in the employee’s IRS W-4 form.

Retention bonuses: to stay or not to stay?

It’s like your employer is begging you not to go

With the rise of job-hopping, companies have started to get creative on how to keep their most skilled employees working for them. One of the ways employers have started incentivizing employees to stick around is by offering retention bonuses. So what does it mean for you when you’re offered a retention bonus?

What is a retention bonus?

A retention bonus is money that incentivizes an employee to stay with a company for a certain amount of time. Some companies will use retention bonuses instead of salary increases because the cost to the, over time, can be less than providing a raise.

More money may seem like a win, but with a retention bonus, you really need to analyze the offer before accepting it.

Why companies offer retention bonuses

Typically retention bonuses are given to senior leaders and key talent, as they are difficult to recruit and time-consuming to train. If there is a restructuring or merger, companies may offer a retention bonus to ensure that you aren’t going to jump ship.

Sometimes a company offers a bonus when an employee has received a new degree or learned a new skill and they want to ensure the employee stays, or if the company is in a competitive market and there are a lot of offers coming around.

Or, your company may offer you a retention bonus as part of a counter offer after you’ve given notice that you’re leaving.

Read the fine print

Always read the terms of your retention agreement. It’s important that you understand everything that you’re being asked in exchange for the bonus.

Is the bonus paid at the start or end of the retention period? How long is the retention period? (and are you prepared to stay that long?) if you were to leave the company before the end of the retention period, how much of the bonus would you be expected to return?

Another detail to consider is taxes. Bonuses are typically taxed as income, so it’s important to consider whether the amount of money that you would be receiving after tax will be worth it if you were already looking to leavethe company.

How to negotiate a retention bonus

If you’re interested in taking the bonus but it’s not enough or you have terms you’d like to address, you can and should negotiate.

You can ask for time to consider the offer, and then come back with your requests. You might negotiate for more money, a shorter retention period, a change in when the bonus is paid, or you might even request to forgo the retention bonus and request a pay raise instead.

Negotiating for more money

Thank you very much for your offer. It has certainly given me a lot to consider as I decide where to take my career. I would be happy to accept if we could increase the current offer by X.

Negotiating for a shorter retention period

Thank you very much for the generous bonus offer. I believe the amount is appropriate, though I would like to discuss the retention period. I would be more comfortable with an 18-month retention period instead of a 24-month period. Is this something you’d be willing to shift?

Negotiating for a pay raise instead

Thank you for the bonus offer. I want to be frank about my circumstances. I have been approached by recruiters at other companies and am considering offers. I would be happy to stay on with the company in exchange to a pay raise to X in lieu of the bonus offer.

If you’ve negotiated terms, be sure that your employer provides an updated offer letter before you sign anything.

To accept or decline?

It all depends on you. Is the offer enough to get you to stay? And if it isn’t, is your employer amicable to negotiation? If you’re already in a toxic work environment or ready to leave the company as soon as possible, money in your pocket might feel good now, but you may regret being trapped in an unhealthy work environment down the line. If it's time to leave, it's time to leave.

Types of bonuses: 10 bonus programs for employees

Types of bonuses

There are several types of bonuses. Some plans simply give employees a certain share of the company profits, or perhaps a bonus to the entire company. Other programs give incentives to individuals or teams to perform at or above certain thresholds. And a variety of cash and noncash awards are possible for certain types of achievements in some companies. You can even earn bonuses for being hired or getting your friend a job at your company.

The following article details 10 types of bonuses that are typically seen in the workplace.

One very basic type of bonus program is current profit sharing. A company sets aside a predetermined amount; a typical bonus percentage would be 2.5 and 7.5 percent of payroll but sometimes as high as 15 percent, as a bonus on top of base salary. Such bonuses depend on company profits, either the entire company's profitability or from a given line of business. Sometimes the bonuses are given across the board, and sometimes they are given in larger percentages of compensation the more someone makes.

The purpose of profit sharing bonuses is to encourage employees to understand how their work affects the company's performance and to improve the company's profitability. Learn how your company makes money and how your position can help it make more. The annual report and other statements will give you an idea of how the company is performing. It will also make you look good to your manager if you show an interest in the company's performance.

This type of bonus program is most common in manufacturing plants and is designed to reward productivity and improved product quality. Gain sharing works best when employees become responsible for production quantity and quality and are encouraged to improve the way the product is made. This program reflects a philosophy that employees know their job best.

Gain sharing programs pay out bonuses for statistical improvements in production and quality on a quarterly or sometimes monthly basis, providing a sense of excitement for participants. These programs are often very successful, transforming the manufacturing plant into a center of employee commitment.

Spot bonus award

Some companies reward employees on the spot for achievements that deserve special recognition. Spot bonus awards are typically $50 and up and can be made by your immediate supervisor or any higher-level person in your company. You can get these for just being extra helpful. The math is in employees' favor: companies with spot bonus programs offer approximately 1 percent of payroll and expect to give out such bonuses to 25 percent of the employees eligible for them, allowing them to earn more than one instant bonus in a year.

Noncash bonus

Although the wrong kind of "employee of the month" concept can be cheesy, it's all in the execution. A well designed noncash bonus program can instill pride and improve employee morale. Employees who have done a great job should have to come to the front of a crowded room at a special ceremony as if they are receiving an academy award. The certificate or trophy should be thoughtfully and cleverly designed, and appropriate to the occasion. These awards are sometimes coupled with a token tangible award, such as a gift certificate, a bonus day off, or a great parking space.

You know your company has a good noncash bonus program if these awards are coveted, and if people who receive them display them proudly at their desks or in their homes. Moreover, this type of award may help you get a promotion or a new job, so include it on your resume.

Sign-on bonus

No longer just for star athletes, sign-on bonuses have become commonplace. Their usage now extends to nearly all level of employees, especially when unemployment is low and top talent is hard to find.

Given to new employees who have just joined the company, this award serves two purposes:

Establish goodwill

Buy out any compensation "left on the table" from a previous employer.

The second purpose is important to remember. Before joining a new company, be sure to account for every kind of compensation program in which you participate. If you are expecting a bonus in a few months, ask your new employer to buy you out of it. If you have any stock options, particularly options that are in the money, ask the employer to buy them out (either in cash or new stock options).

Don't forget to include profit-sharing bonuses or defined contributions (for example, a 401(k) match or an employee stock options program (ESOP)) made to your retirement account. Remember, a sign-on bonus is to keep you whole as you trade one set of compensation programs for a new one.

Medium to large signing bonuses may be paid over a period up to a year to protect the company's interests.

Mission bonus (also known as a task or milestone bonus)

Task bonuses are given to a team of employees for achieving a milestone or for completing an important project. Usually, these bonuses are offered sparingly, but they have been used more frequently in software and hardware development to encourage meeting tight deadlines. Sometimes these programs incorporate a quality measure to guard against too much focus on speed.

Mission bonuses can be significant (one month's salary is not uncommon, and certainly no less than one week). This award is for the kind of achievement that deserves mention in your resume.

Referral bonus

In hot job markets, it can be difficult for employers to find qualified personnel. When talent is scarce, many employers retain recruiters to find candidates, typically paying the recruiter 20 to 30% of the new hire's first-year pay. Many employers prefer to avoid this fee, and instead, offer referral bonuses to employees for recommending friends and acquaintances. Employers are comfortable in hiring friends of employees because employees are unlikely to recommend people who will make them look bad. So don't be afraid to invite your friend to work at your company!

Referral bonuses are typically hundreds to thousands of dollars and typically depend on the level of the new hire. Some firms pay as much as $10,000 to $20,000 if you introduce a new senior person to the firm. So if your former boss is a good fit for an opening, it's worthwhile to let your company know.

Retention bonus

Retention bonuses are given to employees in unusual circumstances, such as a merger or acquisition, or when an important project needs to be completed. These bonuses are designed to provide continuity when there is potential uncertainty about an employee's continued employment at the company. The bonus encourages employees to stay until a specified date so that critical activities can continue without disruption. Retention bonuses are usually about 10 to 15% of salary.

Holiday bonus

Holiday bonuses range from small gifts; from cash to the ubiquitous holiday turkey to one month's salary. The amount is usually dictated by the company's practices. If you do receive one month's salary, count it as part of your salary if you look for work elsewhere. This practice is usually referred to as a "13-month salary," and is not a true bonus since no performance is required to receive it.

Sales commission

Sales commissions are awarded to salespeople for selling. Usually, these awards are paid out as a percentage of sales volume. In some cases, commission percentages can increase with higher sales volume. In fewer cases, the percentage can decrease. It all depends on the scheme. Sales commissions are a significant source of income for sales employees, comprising at least 50% of total cash compensation.

If you are accepting a new job or sales territory, ask for the previous salesperson's sales performance. This will help you determine how likely you are to achieve your quota and sales target. Also, don't forget to construct a business plan based on your understanding of your sales territory. This is key to understanding how easy or difficult hitting your goals will be.

Check if you can claim the job retention bonus from 15 february 2021

Find out if you’re eligible to claim the job retention bonus and what you need to do to claim it. You will be able to claim it between 15 february 2021 and 31 march 2021.

This guidance was withdrawn on 5 november 2020

The job retention bonus will no longer be paid in february, as the coronavirus job retention scheme has been extended until the end of march 2021. Further details about the extension are available.

You cannot claim the job retention bonus until 15 february 2021. This guidance will be updated by the end of january 2021 with how to access the online claim service on GOV.UK.

The job retention bonus is a £1,000 one-off taxable payment to you (the employer), for each eligible employee that you furloughed and kept continuously employed until 31 january 2021.

You’ll be able to claim the bonus between 15 february 2021 and 31 march 2021. You do not have to pay this money to your employee.

Who can claim

You can claim the bonus if you’re an employer who has furloughed employees and made an eligible claim for them through the coronavirus job retention scheme. Your employee must have been eligible for the coronavirus job retention scheme grant for you to be eligible for the bonus.

You can still claim the bonus if you make a claim for that employee through the job support scheme. Guidance on the job support scheme will be published soon.

If you have repaid coronavirus job retention scheme grant amounts to HMRC

You cannot claim the bonus for any employees that you have not paid using the coronavirus job retention scheme grant because you have repaid all the grant amounts you claimed for them. This applies regardless of the reason why you repaid the grant amounts.

Employees you can claim for

You can claim for employees that:

You made an eligible claim for under the coronavirus job retention scheme

You kept continuously employed from the end of the claim period of your last coronavirus job retention scheme claim for them, until 31 january 2021

Are not serving a contractual or statutory notice period for you on 31 january 2021 (this includes people serving notice of retirement)

You paid enough an amount in each relevant tax month and enough to meet the job retention bonus minimum income threshold

If HMRC are still checking your coronavirus job retention scheme claims, you can still claim the job retention bonus but your payment may be delayed until those checks are completed.

HMRC will not pay the bonus if you made an incorrect coronavirus job retention scheme claim and your employee was not eligible for the coronavirus job retention scheme.

Employees who have been transferred to you under TUPE or due to a change in ownership

You may be eligible to claim the job retention bonus for employees of a previous business which were transferred to you if:

TUPE rules applied

The PAYE business succession rules applied

The employees were associated with the transfer of a business from the liquidator of a company in compulsory liquidation where TUPE would have applied if the company was not in compulsory liquidation

To claim the job retention bonus for employees that have been transferred to you, you must have furloughed and successfully claimed for them under the coronavirus job retention scheme, as their new employer. The employees must also meet all the relevant eligibility criteria for the job retention bonus.

This means that you will not be able to claim the job retention bonus for any employees who are transferred to you after the coronavirus job retention scheme closes on 31 october 2020.

Claiming for an individual who’s not an employee

You can claim the job retention bonus for individuals who are not employees, such as office holders or agency workers, as long as you claimed a grant for them under the coronavirus job retention scheme and the other job retention bonus eligibility criteria are met.

The minimum income threshold

To be eligible for the bonus you must make sure that your employees have been paid at least the minimum income threshold.

To meet the minimum income threshold you must pay your employee a total of at least £1,560 (gross) throughout the tax months:

6 november to 5 december 2020

6 december 2020 to 5 january 2021

6 january to 5 february 2021

You must pay your employee at least one payment of taxable earnings (of any amount) in each of the relevant tax months.

The minimum income threshold criteria apply regardless of:

How often you pay your employees

Any circumstances that may have reduced your employee’s pay in the relevant tax periods, such as being on statutory leave or unpaid leave

We will check that your employees have been paid at least the minimum income threshold by checking information you’ve submitted through full payment submissions via real time information (RTI).

What payments are included in the minimum income threshold

Only payments recorded as taxable pay will count towards the minimum income threshold. Taxable pay is reported to HMRC as a single figure through full payment submissions via real time information (RTI).

If you are making redundancies

If you make redundancies, you must comply with the normal rules for redundancy, which include using fair redundancy criteria. These rules apply even if this means that fewer of your employees are eligible for the job retention bonus.

Get ready to claim

You cannot claim the bonus until 15 february 2021. This guidance will be updated by the end of january 2021 with details on how to access the online claim service on GOV.UK.

Before you can claim the bonus, you will to need to have reported all payments made to your employee between 6 november 2020 and 5 february 2021 to HMRC through full payment submissions via real time information (RTI).

There are some steps you need to take now to make sure you’re ready to claim.

Still be enrolled for PAYE online

Comply with your PAYE obligations to file PAYE accurately and on time under real time information (RTI) reporting for all employees between 6 april 2020 and 5 february 2021

Keep your payroll up to date and make sure you report the leaving date for any employees that stop working for you before the end of the pay period that they leave in

Use the irregular payment pattern indicator in real time information (RTI) for any employees not being paid regularly

Comply with all requests from HMRC to provide any employee data for past coronavirus job retention scheme claims

Using an agent to do PAYE online and claim the job retention bonus

If you use an agent who is authorised to do PAYE online for you, they will be able to claim the job retention bonus on your behalf.

This guidance will be updated by the end of january 2021 with details on how agents can claim the bonus for you.

Tax treatment of the job retention bonus

You must include payments you receive under the scheme as income when you calculate your taxable profits for income tax and corporation tax purposes.

Businesses can deduct employment costs as normal when calculating taxable profits for income tax and corporation tax purposes.

Individuals with employees that are not employed as part of a business (such as nannies or other domestic staff) will not have to pay tax on grants received under the scheme.

When the government ends the scheme

You will have until 31 march 2021 to make a job retention bonus claim after which the scheme will close. No further claims will be accepted after this date.

You will not be able to claim until 15 february 2021 and this guidance will be updated by the end of january 2021 with details on how to access the online claim service.

Contacting HMRC

We are receiving very high numbers of calls. Contacting HMRC unnecessarily puts our essential public services at risk during these challenging times.

Get help online

Use HMRC’s digital assistant to find more information about the coronavirus support schemes. You can also contact HMRC if you cannot get the help you need online.

Other help and support

You can watch videos and register for free webinars to learn more about the support available to help you deal with the economic impacts of coronavirus.

Employee retention and turnover solutions

To solve employee turnover, we look at employee retention best practices and organization-specific strategies.

Current best practice is to improve the employee experience in order to increase employee engagement and retention—and all the other great things that come with them, like improved business performance.

The CMO of people maps the employee experience from the employee’s perspective instead of HR’s perspective. This small shift can help focus efforts on a great experience instead of an efficient process.

Even before someone is hired, they can begin to experience the passion of the leadership, the camaraderie of the workplace, and the inspiration of the organization’s purpose.

An employee value proposition (EVP) articulates what a person gains by working for you. Defining and communicating your EVP improves both recruitment and retention.

Gartner reports that organizations that effectively deliver on their EVP can decrease turnover by nearly 70%. They identify five key categories of a strong EVP:

Rewards includes compensation, health benefits, and recognition awards

Work includes person-job fit and work-life balance

Opportunity includes career and development opportunities

People includes coworkers, managers, and senior leaders

Organization includes product quality and social responsibility

Starting day one, you will want your employees to experience the EVP throughout their time with your company. These are all opportunities to engage and retain your talent - or not.

That said, when it comes to turnover in your unique organization, a general best practice may not be the answer. The solution depends on the problem.

Your retention efforts will be more effective (and cost-effective) if they are tailored to the critical people at risk of leaving. Based on who these critical people are and the reasons they are at risk of leaving, consider the following strategies to reduce employee turnover.

Total rewards

Compensation has less to do with retention than most people believe. However, it is a major factor in deciding between job offers.

If an employee is recruited by another company that offers higher pay, that could be a key reason they leave. The same goes for benefits and perks—vacation time may not be why employees stay, but it could be why some leave.

Therefore, regularly benchmark your total rewards against your competition for talent. Also, listen to employee feedback on what they value. That said, avoid competing on pay and giving employees every perk they ask for. It’s unsustainable, with diminishing returns.

What you can do is make sure that your employees are recognized for the hard work they do. Everybody prefers to be appreciated in a specific way, which is why we recommend checking out our study with surveymonkey about the five languages of appreciation. Rewards isn’t just about monetary amounts—it’s also about building trust, making others feel seen, and providing a positive employee experience.

Onboarding

Many people quit because the job wasn’t what they expected. Before hiring someone, ensure you are providing them realistic previews of the job and work environment.

Then, use your first impression wisely. Essentially, you want to affirm their decision to join the company. Make their first day special, make them feel welcome!

Next, set them up for success. People quit when they feel neglected, overwhelmed, under-qualified, or under-trained.

Be extra clear with new hires about the role and expectations. Ensure they have enough access to their supervisor when they have questions. No matter how brilliant they are, everyone has a learning curve in the beginning.

Finally, socialization into the culture is the biggest missed opportunity in onboarding. Incorporate culture into your onboarding program. Integrate formal and informal opportunities to build connections with co-workers. A buddy or mentor program is a common approach that gives the employee someone to go to with the less technical, more “how do you use the espresso machine?” kind of guidance.

For more tips on effective onboarding, check out our webinar: employee appreciation starts with onboarding.

Leadership

There’s no denying how important managers are. Supervisors play a key role in most retention drivers. That’s why enabling leaders to be their best is so important.

New managers need training, coaching, and support. They need the information and tools to lead their teams. For more details, read our summary of a strong leadership toolkit.

Apart from the role they play in retaining employees, it is critical to retain leaders! Don’t assume that just because they’re higher up in the career ladder, that they need less appreciation for their hard work. A good place to start is by recognizing your leaders.

Plus, don’t forget about your most senior leaders. Pwc’s strategy& reported turnover among ceos at the world’s largest companies at 17.5% in 2018, a record high in 19 years. These senior leaders can leave huge information gaps in their wake if they leave, so don’t just assume they’re here to stay.

Most of the time a CEO leaves, it’s a planned succession. However, successor ceos tend to deliver lower performance and shorter tenures. Which makes it all the more important to retain, engage, and prepare the people in your succession pipeline.

Learning and development

“A CFO asks a CEO: what happens if we invest in developing our people and then they leave us?

The CEO responds: what happens if we don’t and they stay?”

Development shouldn’t stop after an employee is trained to meet the expectations of the role. When you provide your people with the time, encouragement, and access to learning, then you are helping them to feel valued and that the company cares about their personal success. Bonus points if these employees are continually recognized for their ambition.

Based on the budget and function, this could be in the form of an online learning platform, conferences, job shadowing, mentorship, and peer-to-peer knowledge sharing.

Development should also be the focus of your performance management program. (by the way, we have a complete guide on that, too.)

Recognition

To provide the feedback that employees want, combine performance development with recognition. Josh bersin reports that the top 20% of “recognition-rich” companies have 31% lower voluntary turnover rates.

When employees feel under appreciated, robert half found two thirds of employees would leave their jobs. Gallup found they were twice as likely to quit within a year.

Moral of the story: when you recognize and appreciate your employees, they’re more likely to stick around—and be more engaged, productive team members as well. Find information and benefits about effective recognition in the guide to modern employee recognition.

Growth and advancement

Growth encompasses the opportunity to contribute more, whether it’s a promotion or greater participation in decision making. Without changing jobs, employees can find growth through greater meaning in the work and greater contribution to the organizational purpose.

In a survey of over 2,000 professionals, over 90% would trade pay for meaning. On average, they would be willing to earn 23% less in their lifetime. They would even learn less just for a manager who cared about them having meaningful work.

When employees have meaning, they are more productive and take less time off. The study estimates this generates an additional $9,078 per worker for the company, every year. Furthermore, turnover risk reduces by 24% when shared purpose is combined with social support.

Any job has room for creativity and meaning. Focusing on the people that the employee helps. Create a shared purpose with the team. Consider job crafting, which allows employees to redesign or reframe their job.

In addition, look for ways to facilitate internal mobility. This could be as simple as ensuring employees are aware of job openings. This can be supported by encouraging one-on-one discussions with managers about developing skills for future jobs.

Wellness and work-life balance

Investing in wellness shows that the company cares about its people, which increases their satisfaction with the workplace. It also happens to improve the bottom line.

This is another area that depends on the needs of your unique employee population, paying close attention to those at most risk of attrition. Examples can be subsidized transit passes, free healthy snacks, or a wellness spending account.

The most important place to instill wellness is in the culture. On-site yoga classes won’t feel very genuine if employees fear they’ll look bad for leaving their desk to participate. Look in your day-to-day interactions and workflows for ways to support well-being.

Work-life balance is a priority and a challenge for pretty much everyone who works. Many are moving to more of a work-life integration or blend.

This had led to high demand for flexible work arrangements, which can save costs and increase productivity but can also introduce new challenges.

Figure out what makes sense for your organization and how to support it from the culture up. How about checking out bonusly’s employee recognition and rewards platform? Join us for a demo to learn more about how you can start building a highly engaged organizational culture. Otherwise, chapter 5 gives you a rundown of the best HR tech tools on the market.

Turnover bonus

Mergers and acquisitions cause a lot of turnover. In fact, a whopping 30 percent of workers can become redundant during the process, and while all of that is going on, companies also have to make sure that they retain key talent during the move, which is where a retention bonus can come into play. And the first step is to craft a retention bonus letter that is ready when you need it.

There are numerous reasons why a company would want to use a retention bonus. The main one, though, is to keep key talent onboard for as long as possible during a merger or acquisition because top talent often leaves for calmer waters during these tumultuous times (or they are poached by competing firms).

By offering them a bonus for continued employment, you ensure that they keep performing at your company, allowing you to get back on track after the M&A and reach your business goals.

And, like we said above, one of the first steps is to create a retention bonus letter to keep on file so that you don't have to make one ad-hoc during a merger or acquisition event.

Let’s get started with the basics.

What is a retention bonus letter?

A retention bonus letter is a document used to extend a retention bonus to your staff members while going through a merger or acquisition. In short, it provides an incentive in the form of a one-time (or two-time) payment for your top performers to keep them working at your organization for a given amount of time after the M&A event takes place.

Writing a retention bonus letter: the introduction

When you start to write your retention bonus letter, you need to first understand how you want your bonus to work. Normally, companies figure out how much of a bonus to offer based on a percentage of the employee’s normal salary.

Others use different metrics - scaling bonuses based on performance, for example - to make an enticing offer.

Either way, you will need to fully understand the financial side of the bonus before offering the incentive to your staff members. We recommend that you craft a letter during the early stages of the merger or acquisition with areas for you to fill in later so that you have a document on file (M&as are incredibly stressful - it's helpful to plan ahead).

With that said, the first step to writing a retention bonus letter is to actually start the letter just like you would any other correspondence to your staff.

Next, you want to move straight into what this letter is all about. We recommend getting right to the point with something like this:

“this letter is to congratulate and thank you for [insert reason: tenure at the organization, completing a project, etc].”

As you can see, this gets straight to the point. You need to make sure that you set up your retention bonus agreement (and letter) in a way that the person knows exactly what you are talking about up top.

Writing a retention bonus letter: establish the details

After the introduction, you should hop right into the details about how the retention bonus will play out.

This section can be short and sweet. We suggest you start by congratulating the employee, making sure that they know they are valued. After all, you want them to stick around!

Here’s how this section can look (make sure to fill in your own details inside the brackets):

“we are pleased with all of your hard work and your continued commitment to [company name].

To show our appreciation for your work, [company name] is rewarding you with a bonus of $[insert amount]. This amount, less withholding taxes, will be paid out [insert the payout schedule].”

Now, it’s important to note that retention bonuses are typically paid out after the employee works for your newly formed organization for given period of time, usually over the course of two years, though it depends on your organizational needs.

For example, if your retention bonus agreement states that the bonus will carry on for two years, the employee will get paid a bonus at the end of year one and at the end of year two. This needs to be expressed inside the “[insert payout schedule]” part of the letter.

To learn more about retention bonuses agreements, how to craft one, and everything else you might want to know, click here:

Inside the retention bonus letter, you don’t need to explain all of the details. You just need to announce the offer. We recommend that you set in place a way for your staff member to then reach out if they are interested, allowing you to then send them the full agreement for them to look over and sign.

Writing a retention bonus letter: signing off

After you explain, briefly, the details of the retention bonus agreement, it’s time for the easiest part of the entire letter: signing off.

We recommend that you, again, state that you value the individual and that you look forward to their continued employment.

After that, you can sign off like you would any other letter.

Here’s how this section can look:

“your continued service and commitment to [company name] is deeply appreciated, and we look forward to the future with you at our organization.

You’ve done it! At this point, your retention bonus letter is ready to go. We highly suggest you keep a sample letter like this on file for when you need it. Having the bones of the letter ready to be customized and sent out can make the process a lot easier because mergers and acquisitions are one of the most stressful events an HR department can go through.

Writing a bonus retention letter: the takeaways

A retention bonus letter is a document that is sent out to employees after or right before a merger or acquisition takes place that offers key employees a retention bonus if they stick around at the organization for certain period of time.

Retention bonus agreements are the legally binding contracts that actually extend the offer. The letter is merely what you use to announce the plan to those you want to retain.

When writing a retention bonus letter, make sure you keep it short and simple. Start by showing that you value the employee before moving into the details of what the retention bonus is. Offer a way for the person to show interest in the offer so that you can move forward with them signing the agreement.

After that, thank them, again, for their service at your newly formed company and sign off.

If done correctly, a retention bonus can seriously help you retain your key staff members during a merger or acquisition. By doing so, you can keep your business on track and get over one of the biggest M&A hurdles: talent management issues.

Want to learn more about writing a great retention bonus letter? Download our sample here:

Employee retention and turnover solutions

To solve employee turnover, we look at employee retention best practices and organization-specific strategies.

Even before someone is hired, they can begin to experience the passion of the leadership, the camaraderie of the workplace, and the inspiration of the organization’s purpose.

An employee value proposition (EVP) articulates what a person gains by working for you. Defining and communicating your EVP improves both recruitment and retention.

Gartner reports that organizations that effectively deliver on their EVP can decrease turnover by nearly 70%. They identify five key categories of a strong EVP:

Rewards includes compensation, health benefits, and recognition awards

Work includes person-job fit and work-life balance

Opportunity includes career and development opportunities

People includes coworkers, managers, and senior leaders

Organization includes product quality and social responsibility

Starting day one, you will want your employees to experience the EVP throughout their time with your company. These are all opportunities to engage and retain your talent - or not.

That said, when it comes to turnover in your unique organization, a general best practice may not be the answer. The solution depends on the problem.

Total rewards

Compensation has less to do with retention than most people believe. However, it is a major factor in deciding between job offers.

Onboarding

Many people quit because the job wasn’t what they expected. Before hiring someone, ensure you are providing them realistic previews of the job and work environment.

Then, use your first impression wisely. Essentially, you want to affirm their decision to join the company. Make their first day special, make them feel welcome!

Next, set them up for success. People quit when they feel neglected, overwhelmed, under-qualified, or under-trained.

For more tips on effective onboarding, check out our webinar: employee appreciation starts with onboarding.

Leadership

There’s no denying how important managers are. Supervisors play a key role in most retention drivers. That’s why enabling leaders to be their best is so important.

New managers need training, coaching, and support. They need the information and tools to lead their teams. For more details, read our summary of a strong leadership toolkit.

Learning and development

“A CFO asks a CEO: what happens if we invest in developing our people and then they leave us?

The CEO responds: what happens if we don’t and they stay?”

Based on the budget and function, this could be in the form of an online learning platform, conferences, job shadowing, mentorship, and peer-to-peer knowledge sharing.

Development should also be the focus of your performance management program. (by the way, we have a complete guide on that, too.)

Recognition

When employees feel under appreciated, robert half found two thirds of employees would leave their jobs. Gallup found they were twice as likely to quit within a year.

Growth and advancement

Wellness and work-life balance

Investing in wellness shows that the company cares about its people, which increases their satisfaction with the workplace. It also happens to improve the bottom line.

Work-life balance is a priority and a challenge for pretty much everyone who works. Many are moving to more of a work-life integration or blend.

This had led to high demand for flexible work arrangements, which can save costs and increase productivity but can also introduce new challenges.

So, let's see, what we have: retention bonuses are tools companies use to incentivize employees to remain with the company. There are many reasons a retention bonus may be offered. At turnover bonus