Retention Bonuses and Earnings Supplements

Introduction

Individuals returning to the mainstream workforce often struggle to sustain the positive behaviors and interactions necessary to maintain employment over time. Additionally, these individuals often struggle with poverty despite employment because they’re likely to have secured low-wage or part-time jobs.

Retention bonuses and earnings supplements aim to address these problems. Retention bonuses are meaningful lump sum payments given to social enterprise graduates at key employment milestones. The bonuses are intended to reward ongoing employment and incentivize employees to “stick it out” to the next benchmark, helping overcome any inclination to quit or engage in negative behaviors that might get them fired.

Earnings supplements, on the other hand, are lump sum payments to workers provided each month for a designated number of months (usually at least a year). These consistent payments help them to stabilize financially and avoid financial crises that could result in them losing employment.

Additionally, some social enterprises use retention bonuses and/or supplements as a way to motivate graduates to stay in touch, facilitating the tracking of outcomes.

Retention bonuses and earnings supplements support the employee supports strategy of incentivizing success by rewarding employees for the long term retention of employment outside of the social enterprise.

Implementation

The availability and value of retention bonuses should be explained to workers while they are working at the social enterprise. Upon placement or hire, the social enterprise lets them know the exact amount, timing, and logistics of receiving rewards. When individuals meet the retention benchmarks (e.g., one month, 3 month, 6 months, etc), they are eligible to collect their bonus. Social enterprise’s may require that the person turn in or email a photo of their pay stub in order to verify that they have in fact reached the milestone.

In practice, earning supplements work similarly to retention bonuses; the key difference is the frequency of the milestones and payments – often each month.

Assessment

Effectiveness and relevance

Random assignment studies determine that retention bonuses and earning supplements are among the most promising practices in improving employment retention for a range of low-income populations. The programs for which there is rigorous evaluation demonstrating impact provided bonuses or supplements of a meaningful amount with individuals potentially earning bonuses of approximately $1,500+ over the course of the first year post-employment.

Availability of public resources

Most public funding sources prohibit direct cash transfer to participants/graduates.

Regulatory barriers

As long as they are allowed by a specific funding source, no other regulations prohibit provision of stipends or bonuses to graduates. If more than $600 is provided to a worker in a calendar year, the social enterprise may need to issue a 1099 (seek advice from your accountant).

Upfront coordination and time required

Because they require limited staff time, retention bonuses and earning supplements can be a very efficient way to encourage and support graduate retention in the labor market. You do need to figure out a payment schedule and mechanism upfront. It is also very important to market retention bonuses to employees throughout their job search phase and not just at the time of hire.