A co-worker was just telling me about his new job he just accepted. He just gave his 2 weeks notice and he’s pretty excited about the new company, more money, shorter commute, etc. He was sharing all kinds of details which, while I didn’t feel comfortable enough to ask… he just volunteered the information! In doing so, he shared some enlightening insights into both how my company handles resignations of top talent, as well as an overall HR tidbit I never considered.
HR Insider Tip: Beware the Retention Bonus
See, his wife is an HR executive and I guess within those circles, certain things are pretty well-known that may not be so obvious to the everyday worker. She had told him, “Once you accept that position and turn in your notice, there’s no going back. No matter what the company offers you to stay, you have to leave“. That didn’t make a lot of sense to me initially. I said, “What if they offer you practically the same salary boost?”. All other things being equal, you get the benefit of more money without having to turn your life upside down with a new company, new culture, new risks, forming a new reputation, etc.
He said his wife shared this statistic that was well-known and widely accepted within her HR circles:
Over 60% of employees that accept a retention package for not resigning – are gone within 18 months
She said that basically, while a company may give you that retention bonus on the spot because they realize they’re in deep trouble if you leave (NOW), they eventually find a way to lay you off or fire you for cause (you can be fired for playing fantasy football, taking home staples or complaining on Facebook!) as soon as they gain their footing with a replacement. She said it was like clockwork and very predictable. In thinking about it further and based on his description, it kind of makes sense I guess. A fired-up VP of some organization has to begrudgingly concede to pay some twerp another $20,000 this year because he threatened to leave. He figures this guy’s head isn’t in the game and doesn’t belong there, but he was forced to give him more money with a gun to his head or else suffer from loss of key working knowledge and expertise. So, when there are a couple heads to cut during the next round of layoffs, and there’s now some redundant understanding of that role, why retain the traitor? (who’s being paid much more than his peers incidentally [very easy to justify]).
This may sound overly simplistic and probably doesn’t apply to many situations anecdotally, but he said the statistic was widely accepted in HR circles and the data speaks for itself. Personally, I know of friends who have threatened to resign and accepted a salary increase to stay, and they weren’t terminated. Actually, they left on their own later for an EVEN HIGHER salary (since they were able to justify it from the new company with a higher current salary). This kind of reinforces why the company did get screwed in the end and I could see how if a company executive gets screwed enough times like this, they may start retaliating if that’s in their personality.
Think Twice Before Trying to Extract a Retention Bonus
Personally, I don’t know if this guy or his wife are correct, or whether this statistic applies to my company, but now I might think twice about accepting a retention bonus if I were ever confronted with the option of staying vs going. After all, it’s MUCH harder finding a high-paying job while unemployed compared to be currently employed (3 Signs Your Job’s About to Be Outsourced). Right or wrong (Unemployment Discrimination Law Coming?), you just have more leverage and companies don’t second guess why you’re not working. So, if you’re gonna go far enough to get that offer, you may want to be 100% sure you’re ready to close that door.
Have You Ever Accepted a Retention Bonus? Would You?
{ 13 comments… read them below or add one }
Interesting Darwin. I have often wondered about whether there was such a result. I guess its like dating, you can threaten to breakup if things don’t change but once you make that threat, things will likely never be the same again (the trust is gone). I always dislike these arbitrary kinds of things in the workforce. Another one is you have to stay in a job you hate X amount of time (generally at least 1-2 years at a minimum) to make it look good. I would be interested to see a whole list of things like this, facts that are common knowledge to an HR person but not clear to the rest of us. Finally, I wonder how that statistic changes if you go to small to mid sized employers rather than bigger corporations.
It was definitely a surprise to me. I’m sure there’s a huge standard deviation across companies, perhaps even industries. But allegedly, that’s the broad number!
Interesting idea. It wouldn’t much surprise me if this were true.
I’d also think that if you were thinking about leaving once, then leaving 18 months later (even if you did get a salary boost) would be just as appealing.
Good stuff.
Darwin
That’s quite the thought/stat. I never would have guessed something like this occurs, but I can see the logic behind it – If the person came to you to quit and already had another job in hand, they’ve been looking for a new position (and possibly interviewing) for quite some time. Why keep them on, as they obviously dont want to be there.
I’ve got a few of the same questions that brokeprofessionals does – maybe a post interviewing an HR person?
If only I weren’t anon! I’d ask his wife if I could interview her!
I didn’t know about any hard facts, but somehow intuitively this always made sense to me. I mean, how would you feel in their shoes?
So, what do you do if they find out you want to switch? How big of an offer would they have to make for you to consider staying?
It would probably burn my ass to some degree, especially if I had to pay my subordinate more than me to keep him LOL! But, I’d like to think it just comes down to talent and retention. If they guy’s good enough and you need him, you’ve gotta pay him market rate. Otherwise he’ll bolt. But I would keep in the back of my mind that he’s probably gonna jet in the future anyway.
Good story! I will keep this in mind and try it a year before I quit. 🙂
Hah, great one. That way you can snag a nice severance package so you don’t have to retire voluntarily!
Depends on the employee and how the situation is handled. I’ve had team members leave for a better position, and wish they had given us notice to match or better the offer (make a market adjustment). On the other hand, I’ve also had one person who negotiated a retention increase, and left of his own accord within a short while .
You know, a company could just ensure they are paying market rate for their employees – so that the employees don’t feel like they need to validate their market rate via other offers.
Guess what a company loves to say if you research your market rate by using online calculators? “Not reliable”.
It sounds like the company was happily enjoying getting a bargain by underpaying an employee and then get egg on their face when they realize, wait a minute, this person actually is worth more money. Now I’m going to pretend the fault is on the employee and passively aggressively fire him because I want to continue scamming employees to work under their market rate.
How ironic if HR for such company ever suggests an employee take an “Ethics course”.
HR is taught the truism that employees don’t leave for money – they were already dissatisfied about something else. Many people simply don’t set out on a job search because they feel they deserve 5% more money. Some top causes of dissatisfaction: relationship with manager, overall company culture or financial stability, lack up growth opportunities, excessive work hours or long commute, etc.
I’ve done exit interviews before and it’s hardly ever about the money – unless a company SEVERELY underpays the market.
Fun Anecdote: Employee came to HR with a competitor offer. Only about 5k a year more than we paid her. We agreed to meet the offer because she was a great employee – but the increase would have put her at the absolute top of pay scale for job. She took our increase to competitor and got another 5k out of them. She brought the (now 10k) increase and asked us to meet it. We saw no end to this and declined to meet the salary. She quit and our CFO said “no more negotiating with terrorists”. He was only halfway joking. From then on, when an employee wanted to leave – we let them. If they were someone we would like to retain, we ask them to stay in touch if they were ever in the market again. That’s it.
What if the shoe is on the other foot? I am in the process of being TUPE transferred to another company. My other colleagues are being made redundant, but they want to keep me, but only for a limited time (6 months), until they start using another system which will make my role redundant. They have offered me a small “retention bonus” for me to stay until that end date. Conditions of the retention bonus are:
1) that I stay until the agreed date
2) They are satisfied with my work
3) If they can’t redeploy me elsewhere within the company
the first two are not a problem, but what if they offer me some rubbish job, knowing that I will refuse? They can then say, that they tried to redeploy me, but I refused, so I don’t qualify for the payment. (Unlikely, but possible.) Any advice?
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