The Great Resignation is no laughing matter. Over 47 million people quit their jobs in 2021, which, when compared to the next highest year of 35 million in 2019, shows that people are resigning faster and more frequently than ever before.
To nail this point home, 76% of employed people are actively thinking of leaving their jobs. We can’t sit and wait for the Great Resignation to blow over. It’s not something that will magically go away.
But why are employees leaving? Recent studies show that it ISN’T based solely on traditional salary or benefits, factors typically cited by managers and executives. The global pandemic caused a reshuffling of priorities for many employees, and this led to the predicament that the workforce is in now.
Employees want and deserve to be treated better. They’re looking for new workplaces that treat them with more respect, give them more recognition, provide more opportunities for growth, and give them better, different, or unique forms of compensation that add value to their lives. There’s no ignoring that we, as HR managers and business leaders, need to do better in offering our employees more value.
Reward & Retain: Improving Compensation to Increase Retention
Let’s not beat around the bush: the answer to the problem of the Great Resignation lies in compensation. More specifically, reforming and redefining how we compensate employees. The idea behind compensation has always been a good old-fashioned trade. You give me your time, effort, and expertise, and I give you money. However, while a decent salary used to be enough to retain talent, a competitive salary is now expected for most.
Many companies tried to expand their compensation by offering fun perks and benefits beyond healthcare and insurance.However, things like healthy snacks, nap rooms, and ping pong tables invite issues of their own. Many of these creative benefits are underused or underappreciated (paid gym memberships, anyone?), and often are viewed as simple distractions by those who don’t use the benefit. This one-size-fits-all approach to providing benefits is ill-suited to retaining individual employees or improving their lives.
So a good salary is expected in the work environment, and creative benefits can only get you so far. How do companies boost their compensation, then? What’s the most common method many companies use to retain talent? Enter the traditional bonus.
Traditional Bonuses: A Good Tool, but Retention Needs More
Bonuses have come a long way since the Industrial Revolution, and they’re now used to reward employees for their efforts.
However, while this type of reward is great in theory, bonuses also pose potential problems. Some bonuses are only given to high-performers or those who have been tenured the longest. At best, these types of bonuses help retain a small portion of the workforce; at worst, they communicate that an employee is only valuable to the organization if they’re in the highest-performing group.
Even holiday bonuses pose concerns for those wanting to boost retention. January historically has the highest turnover rates for most industries. That means many employees are simply staying until the holidays to get their bonus before they quit. A bonus strategy which ignores this trend defeats the whole purpose of a bonus: retention that extends throughout the year!
We have an entire blog about why bonuses don’t work as well as intended, but let’s reiterate what’s found there:
- Bonuses can create feelings of unfairness, jealousy, or disappointment.
- Bonuses often create temporary compliance, where employees stop the desired behavior after achieving the bonus.
- Bonuses may set unrealistic expectations, especially if a company can’t offer consistently satisfying amounts.
- Bonuses sometimes foster unhealthy competition instead of collaboration.
Do you see the running theme here? Compensation is a vital part of retaining employees and surviving the Great Resignation, but competitive salaries aren’t enough anymore. And bonuses can complicate matters if not done properly. This leaves companies in a compensation conundrum. What can you offer to be more competitive?
Introducing Awardco Pay
Awardco has developed a strategy that incorporates bonuses, rewards, and recognition and elevates all of these factors into something great: Awardco Pay, otherwise known as Reward Compensation.
Put simply, Reward Compensation is a form of compensation that is given to every employee. This does not count as part of the employee’s regular salary. A simple example of this would be if an employee makes $50,000 and you have a 1% Reward Comp system set up, that employee would receive $500.
Here’s a key, though. That’s not just a holiday bonus or one-time gift. Remember, bonuses create as many issues as they solve. Instead, that $500 would be given to that employee in regular installments throughout the year. So if you want to give them Reward Comp in addition to their paycheck, you would give them around $20 per payday. If you’d rather offer that compensation each month, you could give them $40 on a specific day.
The point of A-Pay is to show that you value and care for all of your employees throughout the year, not just at irregular intervals. To that end, here are a few key best practices when implementing Reward Compensation:
- Make it different from (and an addition to) regular compensation. Like we mentioned above, this needs to feel different than what an employee normally earns. In fact, employees don’t really have to earn Reward Comp. It’s a gift from employers to employees to show their appreciation. To that end, we recommend providing this cash in the form of points on the Awardco platform. This will ensure employees can spend it on something fun instead of more mundane things (bills, groceries, etc.).
- Ensure every single employee receives something. How you give out Reward Comp is up to you. However, the ultimate goal of this is retention throughout the year. If you don’t provide this compensation to every employee, you won’t boost retention for every employee—it’s as simple as that.
- Give it out at regular intervals. Whether you decide to do something weekly, bi-weekly, or monthly, give each employee Reward Compensation at regular intervals. The point of this feature is to provide people with something they can look forward to throughout the year.
A note on using points on the Awardco platform. With these points, employees can spend their Reward Compensation on anything they want, including items from Amazon, restaurant gift cards, or event tickets. Plus, you can even manage what your employees spend their points on, if you like, by creating custom catalogs filled with thousands of curated items. This guarantees employees buy something fun!
Reward Compensation Recommendations
You may be wondering how exactly you should give your employees this compensation. What is most effective? Every paycheck? Each month? We want to provide a few ideas that will hopefully help you come up with the system that works best for your company and your budget (because that’s the best part of A-Pay—it’s so flexible that you can utilize it however you see fit!).
1. How Much Should You Give Each Employee?
This is a question that each organization will have to answer on their own. In our example above, we said that 1% of an employee’s salary could be added in the form of Reward Compensation. Another option would be to take the budget that you have for regular bonuses and use it for Reward Compensation instead (because this is meant to replace ineffective traditional bonuses anyway).
Awardco’s goal is to dedicate 2% of payroll strictly to rewards and recognition and dedicate 3% of payroll to bonus compensation. We want to show employees that they really are the most important part of our business, and our goal is to retain and recruit the best talent we can.
2. Should Every Employee Be Paid the Same?
This is a big one. Is it best to give everyone the same amount or base Reward Comp on tenure? Once again, this is a question you’ll have to answer, but we’ll just reiterate what we said above: every employee should get some sort of Reward Compensation. So if you tie the amount to tenure, make sure those in their first year still get something, even if it’s only $20 a month.
To hit this point home, the average tenure for Millennials is two years and nine months. The average tenure for Gen Z employees is two years and three months. We’re willing to bet that a good portion of your workforce is made up of these two age groups (35% of the workforce in America are Millennials alone). So if you were to not give employees anything for their first year, that’s a large chunk of your workforce that isn’t getting this reward compensation. Which means more fuel for the Great Resignation fire.
3. What Are Some Recommendations for This Feature?
You can provide Reward Comp in all sorts of ways, which is exciting to think about! The simplest way is to do what we’ve mentioned already: provide everyone with some points in the platform every pay period or every month. However, there are other ways to provide this compensation:
- Specify the rewards. If you give out Reward Comp by the month, you could give each month themed rewards. So in June you could provide outdoor points for people to get new hiking shoes, new workout clothes, or new camping gear. January could be the “stay indoors” month, with points toward streaming services, food delivery, or blankets.
- Tie the compensation in with other programs. Do you have a wellness program that isn’t being used much? Tie Reward Comp in with wellness and provide points for people to use on workout equipment or clothing, gym memberships, or yoga classes. You could also provide these points as a type of travel stipend—give everyone points they can use for plane tickets or hotel stays.
- Use the compensation to create an experience. You could make Reward Compensation even more special by curating experiences. Give people points to go to a fancy dinner with a loved one once a month. Provide the points for tickets to a theme park.
- Combine it with service awards. This goes along with the idea of basing Reward Compensation on tenure. Instead of waiting until an employee’s service anniversary to reward them, give them an amount of points throughout the year based on their tenure. That allows them to get the service award that they really want.
However you choose to give out Reward Compensation, this “bonus” will be infinitely more effective than an end-of-year bonus. Providing points, experiences, or rewards throughout the year will help employees stay excited, build loyalty, and feel valued.
Why Consider Awardco Pay?
You may wonder why this is worth it or where you’re going to get the money to offer Reward Compensation. Let’s work out an example to see the numbers more clearly. If you’re a small business with 100 employees who have an average salary of $45,000. You have a payroll of 4.5 million, and you want to offer 3% of payroll for bonus compensation. That means you’ll dedicate $135,000 per year to Reward Compensation (if you pay every employee an equal amount monthly, that’s around $100 a month per employee!).
You may think that sounds like a lot of money (and for your employees, an extra $100 is a lot—which is awesome!), but that’s the best part: you’ve already budgeted for employee bonuses, so you can simply take that budget and redistribute it into Reward Compensation. That would make sure every employee is rewarded regularly and fairly.
And even if you feel like you would need to pay more for Reward Compensation than with regular bonuses, this feature will pay for itself. With regular recognition and rewards (i.e. Reward Compensation), you can:
And with greater engagement and productivity, you’ll have happier employees who produce better work. PLUS, with that reduced turnover, you’ll save even more money.
Each employee who quits will cost you up to .5 to 2X of that employee’s annual salary to replace. Hiring and training a replacement for an employee making $50,000 will cost you anywhere from $25,000 to $100,000. Think about that the next time you consider if your organization can afford a rewards and recognition solution that can solve all these problems and more.
Awardco can help you avoid unnecessary turnover costs with Awardco Pay. Recognize and reward each and every employee consistently, without holding back, and you’re sure to see more engaged, happy, and loyal employees.
The Bottom Line
When you invest in rewarding your employees, you’ll see huge dividends for your bottom line. Period. Awardco Pay is the newest innovation in employee rewards and bonuses, and we’re confident that employees everywhere will appreciate getting reward compensation on top of their regular compensation. Read the full whitepaper here!