Bonus bonanza can't halt retention crisis


Despite an improvement in benefits packages and a greater frequency of bonus payments, retention levels for managers in Britain are at their lowest for 15 years.

Organisations across the UK are struggling to hold on to their employees, despite an increase in the frequency and value of bonus payments. The 2005 National Management Salary Survey also shows that benefits packages have improved as companies battle to attract staff.

The survey, by the Chartered Management Institute and Remuneration Economics, reveals that almost seven out of 10 executives received a bonus in the year to January 2005, compared to just over half five years ago.

But in spite of the escalation of bonus payments, nearly half (45 per cent) of companies are reporting retention problems – the highest level for 15 years.

While more than six out of 10 organisations (62 per cent) blamed competition from other organisations for people leaving, almost half (45 per cent) admitted they offered them little in the way of career progression or training.

Some four out of 10 cited salaries and job security as reasons for job changes.

Mary Chapman, chief executive of the Chartered Management Institute, said that the shortage of managers and staff with relevant skills could threaten organisations' competitive advantage.

"Many organisations admit that they fail to provide adequate development initiatives, even though it is a major reason for leaving," she added.

"If employers are serious about reversing the current recruitment and retention trend, they must address this issue and develop incentives that suit employees' needs."

The findings also reveal that the average total earnings for managers in the UK are £46,054, a rise of 4.3 per cent in 2005, against 4.4 per cent in 2004. Combined earnings, however, rose by 5.3 per cent, compared to 4.8 per cent the previous year.

Salaries account for a large proportion of 'guaranteed take home pay' because at £4,530, the average bonus is worth only one tenth of total income.

Directors, in contrast, rely on bonuses for almost 40 per cent of their total earnings. This differentiation is important as company and personal performance affect bonuses for two-thirds of directors, compared to fewer than six out of 10 (56 per cent) of managers.

But despite the growing use of inducements such as signing on bonuses and referral payments, there is clear evidence in the survey that organisations are finding it increasingly difficult to attract staff.

More than four out of 10 (43 per cent) said they had experienced recruitment difficulties, up from 31 per cent last year. Of those companies facing recruitment problems, more than two-thirds (69 per cent) put them down to a lack of candidates with specialised skills, especially those in IT management, engineers and salespeople.

In an effort to tackle these recruitment and retention problems, organisations are boosting their incentive schemes, with nine out of 10 now giving cash alternatives to traditional perks.

The most popular benefits are a personal pension scheme - one in five companies provide non-contributory plans for all employees, although those offering final salary schemes has dropped to only a third - life assurance cover and health insurance.