COMP News – Some organizations in the tech industry are turning to cash bonus plans to award employees and promote retention.
Alphabet Inc., GOOG 1.39% which owns Google, adopted a new cash bonus plan in October that lets the company give employees bonuses of nearly any size for nearly any reason. Amazon. AMZN 1.61% com Inc. said this month it doubled its cash-pay cap for employees. Some cryptocurrency and nonfungible-token startups are offering pay packages with larger cash components than long-established tech companies in the hunt for workers, according to some tech recruiters.
Employers’ recent changes to compensation have been fueled by a desire to blunt attrition during a period of labor market upheaval caused by employees re-evaluating their careers after two years spent working from home, recruiters and compensation consultants said. Inflation and the stock market’s volatility have also led staff to re-evaluate their appetite for risk and preference for cash.
In addition, some companies are raising their merit pay pools to allocate larger employee cash bonuses.
As cash compensation looms larger, some companies are increasing the size of merit-raise pools to 4% of payroll from a typical level of 3%, said Robin Ferracone, founder of compensation consulting firm Farient Advisors.
A 2017 tax-law change could also lead companies to broaden their bonus plans, dropping performance criteria that no longer bring the tax breaks they used to, said Steven Hall, managing director of compensation consulting firm Steven Hall & Partners.
Also, companies are focusing on how the timing of bonus payments could affect employee retention.
Companies with multiple payouts during a year sometimes find employees leaving immediately afterward, whereas annual payouts can lead them to stay a little longer, compensation experts say.
Because of this phenomenon, tech behemoth Meta has adjusted its bonus structure from semiannual payments to one cash bonus per year.
Meanwhile, Facebook parent Meta modified its own cash bonus plan effective Jan. 1, to replace a system of semiannual cash awards with one that pays out only in the first quarter of the following year, though employees could get advances on that sum this September.
To read more about tech giants using cash bonuses as incentive rewards, click here.
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