Post-Pandemic Compensation: Employee Recognition Through One-Time Bonuses

By Linda L. Cox, ERI Economic Research Institute 

A great work culture is so important to attaining high levels of employee engagement. The Coronavirus (COVID-19) has presented many unique challenges in managing employee engagement and the work culture. As we transition to a post-pandemic environment, employees are now returning to the workplace and/or adapting to revised remote work schedules. The stability of the business and employee safety due to COVID-19 are important factors that companies are embracing in the workplace. Businesses are different, economies are uncertain, staffing can be challenging, and employee needs are unique, all of which will affect the workplace culture and employee engagement. How do you maintain or improve the workplace culture and engagement during this time of transition? 

Certainly, offering competitive pay and benefits will support in attracting and retaining a quality workforce. Another way to contribute to a strong company culture is to reward and recognize your team through an annual incentive plan and one-time bonuses. During this time of low base pay increase budgets, incentive pay is more and more important as companies adjust their compensation strategies. Employers are increasingly updating their compensation strategies and pay mix – placing more emphasis on short-term incentives to reward for performance.   

This paper will focus on the use of one-time bonuses for new hires, employee referrals, spot bonuses, employee retention rewards, and enterprise-wide bonuses. Here are just a few examples of how companies are using one-time bonuses in 2021: 

Global consulting firm Accenture is rewarding its global workforce up through the associate director level with a one-time bonus to show appreciation for hard work throughout the COVID-19 pandemic. 

According to the Australian Financial Review, an internal email was sent in March 2021 from CEO Julie Sweet revealing that the compensation would amount to one week of base pay for each employee. “We are excited to announce that all our people up through the associate director level will receive a one-time ‘thank you’ bonus that equals one week of base pay,” Sweet commented in an email seen by AFR. “The contributions and impact that you have made during this difficult year are nothing short of extraordinary and we want to recognize that by sharing the success you helped to create.” 

Raytheon Technologies is offering employees a monetary bonus if they get the COVID-19 vaccine, the company’s top executive said on April 7, 2021.  Raytheon has a commitment to vaccinate at least 80% of its 180,000 or more employees. Raytheon Technologies CEO Gregory Hayes said at the Washington Virtual Economy Club Event, “In fact, there are small financial rewards for people to get vaccinated.” 

According to a spokesman for the company, COVID-19 vaccination will earn employee points in the company’s wellness program. The program also rewards annual medical vaccinations, flu shots, exercise, and smoking cessation. After earning a certain number of points, the employee will earn a cash bonus of $200. 

 

Raytheon is not the only company offering employees bonuses to get vaccinated. Aerojet Rocketdyne is offering employees $50 for vaccination, a spokesman for the company said. The Kroger Family of Companies also issued a press release in February announcing that it will provide a one-time payment of $100 to all associates who receive the full manufacturer-recommended doses of the COVID-19 vaccine. 

In addition to the new vaccine payment, the company also announced an additional $50 million investment to thank and reward associates across its 35-state footprint, including a $100 store credit and 1,000 fuel points loaded to loyalty cards for hourly, front-line grocery, supply chain, manufacturing, pharmacy, and call center associates.  

The one-time $100 vaccine payment will be offered to all associates who receive the full manufacturer-recommended doses of the COVID-19 vaccine and present appropriate proof of vaccination to their human resources representative. Associates who cannot receive the vaccine due to medical or religious reasons will have the option of completing an educational health and safety course to receive the payment. 

This use of incentives reveals a lot about a company’s culture and employee engagement. These companies have proactively taken steps to recognize and reward employees after a challenging year. 

Types of One-Time Bonuses 

Spot Bonuses 

Spot bonuses are used to recognize and reward one-time events, such as outstanding performance, perfect attendance, project completion, or other important achievements.  An enterprise-wide award has become increasingly more common during the pandemic and the reopening of businesses. Spot bonuses are most commonly used for non-executive employees. Maximum awards are commonly between $1,000 to over $5,000 before taxes and are typically not grossed up. 

A Tiered Recognition Program, as in the example below, provides various employee reward levels, which can be approved by different levels of management. A program like this can be budgeted and used on a regular basis, while allowing for immediate recognition in rewarding and recognizing special employee achievements.  

 

Spot bonuses can also recognize innovation, customer service, top performance, employee of the month and year, safety, anniversaries, teamwork, creativity, leadership, and even the employees’ selection. 

These programs can easily be transparent to the workforce and, when effectively used, are a positive influence on the culture of an organization. 

Retention Bonuses  

Retention bonuses are typically used to support a crucial business or production cycle, such as an acquisition, divestiture, or relocation. Retention bonuses support in employee retention during a difficult organizational transition. 

All employees are commonly eligible for a retention bonus, but they are typically made available to professional, management, and executive employees. Retention bonuses should not be overused within a company. They should be carefully utilized for crucial business events. 

The majority of retention bonuses are between 10% and 20% of annual base pay and are typically delivered as a flat dollar amount. Some executive retention bonuses will even exceed 20% of annual base pay. Some companies will elect to calculate the retention bonus as a percent of base pay or even based on management discretion. They are typically also paid out in a lump sum. 

New Hire Sign-On Bonus  

Sign-on bonuses are used by the majority of businesses to enhance a new hire package to close a job offer. Executive, management, technical, and sales hires are most frequently eligible for sign-on bonuses. Sign-on bonuses range from $1,000 to over $50,000. Typical reasons to use a sign-on bonus include unpaid bonuses, forfeited stock options, salaries over the salary range maximum, potential equity issues, offsetting lost pay or benefits, a relocation, and even an incentive to move to the new company. Some companies will even offer student loan repayment incentives to attract new hires. 

Most sign-on bonuses are delivered as a flat-dollar amount rather than as a percentage of pay. The range of sign-on bonuses varies based by job level. Common ranges of sign-on bonuses follow: 

 

Most sign-on bonuses are paid in one lump-sum payment. Occasionally, the payment will be split, with a portion paid upon hire and the remainder after one year. When a voluntary termination takes place within the first year, typically the new hire will be affected by a forfeiture provision. 

New Hire Referral Bonus  

A new hire referral bonus is a reward given to eligible current employees when a recommended job candidate is hired for a job. This is an excellent program to support in the staffing process but also in the engagement and retention of team members. Typically, executive management are not eligible to participate in the program, but the program is available to all other employees. A new hire referral bonus is prevalent in the marketplace, with almost two-thirds of companies providing this incentive for most open positions. 

 

The majority of companies will pay out the new hire referral bonus as a lump sum between 45 days to 6 months from the date of hire. A well-marketed program will encourage employees to use social media to advertise open jobs to their network of qualified family and friends. 

Overtime Calculations 

When designing bonus programs, keep in mind that all nondiscretionary bonuses paid to nonexempt employees need to be accrued and added to employee’s “regular compensation” for overtime calculation purposes. This also applies to gift cards and meals provided. If it is “promised” or expected or part of a compensation package, then it must be accrued and becomes overtime-eligible compensation. It is always helpful to check with applicable law and/or a labor attorney to determine if a bonus program is discretionary or nondiscretionary compensation. 

Summary 

As the workplace reopens and changes take place within a remote workforce, this is an excellent opportunity to assess these important total reward programs to strengthen your work culture and employee engagement. Incentive pay and one-time bonuses can be managed to complement a fair, equitable, and market-competitive total rewards program. Clearly, these important programs reinforce a great company culture and support employee engagement.