Client Question: As confirmed cases increase, we are experiencing more tardiness and turnover on our front lines. How do you feel about offering additional incentives for employees who continue to work as scheduled during this time?

Answer: Before considering this course of action, you must decide if the purpose is to incent specific results or offer your employees a bonus. Retailers such as Walmart and Kroger are paying their employees a bonus as an acknowledgment of how busy they have been during this crisis. A bonus is a token of appreciation and doesn’t incentivize particular behaviors. The idea is that employees who feel appreciated will continue to work and be productive.

To be effective, an incentive plan must provide enough value to your employees to reduce turnover and tardiness. Historically, non-exempt employees of financial institutions have received an average of 4% of base pay as an incentive for offering products or services or simply as a reward when the company hits its goals. When paid out monthly according to personal production, this amount may incent employees to focus on offering certain products. When paid annually based on corporate goals on which they don’t have a day-to-day impact, the payout is too little, too late to be effective.

An incentive must motivate employees to perform better than they would have under general good management

An incentive must motivate employees to perform better than they would have under general good management. When successful, incentives provide more value than their cost, just like any other necessary expenditure. After all, at its core, business is about effectively utilizing resources. To motivate employees to show up to work on time for a certain period, an organization could issue a monetary reward for every pay period in which employees meet these benchmarks. But I would advise you to ask and answer more questions to ensure you don’t reward the wrong behaviors or suffer unintended consequences:

1. Would such a reward incent employees to come to work sick?
2. Would those who are using paid time off be eligible to participate?
3. When the pandemic is over and the incentive ends, would employees be less likely to stay employed and report to work on time?
4. Should all hourly employees be eligible to participate or just those on the front lines?
5. How long would this incentive be in place?
6. What is the cost of the current turnover? 
7. What is the potential expense if every eligible employee received the maximum reward?
8. Would an additional reward be given to employees who stayed employed and were on time the entire quarter?
9. Is the fear of the novel coronavirus increasing turnover and tardiness, or is there another explanation? You have to determine the actual cause of your problem before you can develop an effective incentive to counter it.

You asked if it would effective to offer a cash incentive to reward employees who report to work on time as scheduled. Ultimately, it depends on the motivation of your employees. If they are afraid for their lives, I’m not sure any reward would be effective. 

However, if your employees are more worried about supporting their families and would welcome the opportunity to make extra cash each pay period, you may have a successful incentive program. Having said this, I suspect the amount necessary to be effective would have to be equal to 10% or more of their pay. 

To use an example from more typical times: What would it take to retain a valuable employee who has a poor relationship with their manager? If the unemployment rate is 3.8%, no reward will keep them. If the unemployment rate is 10% or greater, no reward may be necessary.

Side note: Arriving to work on time is a habit that would have been a baseline expectation not long ago. If unemployment rates rise drastically, we may be on a permission-to-play level again. 

This is a thorny problem faced by managers in almost every industry. Please report back about how your organization decides to proceed, and I wish you the best of luck.

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