Q I am struggling to retain qualified staff. I’m thinking of paying retention bonuses but can I be selective over who I pay retention bonuses or give incentives to?
A Given the present jobs market, some employers are using bonuses to assist with staff retention and recruitment, including in sectors that would not normally pay bonuses to recruit staff. If your competitors are offering recruits signing-on bonuses, this could incentivise staff to leave. In the short term, you could try to counteract this by offering existing staff a retention bonus.
This may be preferable to increasing base salaries, particularly if the labour shortages in your sector are expected to ease. An alternative way of securing some employees’ loyalty might be to pay for skills-based training and development.
It is important, however, for employers to consider a number of key legal issues that may arise:
Discretionary vs contractual obligation
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When facing a recruitment and retention issue, it can be tempting to quickly offer financial incentives outside of any annual bonus schemes but bonus schemes are carefully drafted, covering performance criteria, vesting, forfeiture and clawback provisions, and they will typically be drafted as discretionary schemes.
Where you are offering a retention bonus or paying for a training course the intention of both parties will normally be to create a contractual entitlement subject to conditional elements.
A retention bonus should be more straightforward but problems can arise if the terms are not set out clearly in writing. Express terms should state the amount of any bonus, date of payment and the conditions of payment, such as length of employment.
Likewise, with training courses there will normally be repayment obligations if the person were to leave within a specified period. An important point to check is that you have an express right to make deductions from wages in case repayments are required.
Unlawful discrimination
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A key consideration for all employers is that equality law applies when they are deciding who to award bonuses to or whom to offer training opportunities or other benefits.
If you are paying bonuses only to key workers or new recruits, for example, you will need to make sure that you do not exclude or subject employees in that group to different terms either directly or indirectly because of a protected characteristic, for example, on grounds of race, sex, disability or age. Otherwise, this may amount to unlawful discrimination.
Cultural changes
When devising a strategy for dealing with staff retention there is a real danger in making sweeping generalisations about why people are changing jobs. A retention bonus may be too blunt a tool in many situations. Longer term you may want to focus on other aspects of work life that engage your employees, such as your working culture. This could include a package of incentives that play to the factors most important to staff.
Employers that investigate and reframe their employee relationships in this way are more likely to generate continued loyalty and staff retention.
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Angharad Harris is a employment law partner at Keystone Law
