162 Bonus Plan

A recent article in Forbes from our friend and HR expert Tracy Brower, PhD, explains that employer retention is on the rise. A new poll from B2B Reviews finds 70% of employees aren’t currently looking for a new job. That’s good news for employers and employees; employers are enjoying stability and continuity, while employees are experiencing job satisfaction and security. Employers are focusing on organizational culture and offering benefits that resonate with their workforce. Providing competitive salaries, robust benefit plans, and key person reward programs enhances overall retention. This emphasis on retention seems to be most fruitful for small to medium-sized businesses and non-profit organizations. That is all good news. 

When it comes to retaining and rewarding their highly skilled, uniquely experienced, and key drivers of organizational success, most organizations are evaluating some form of deferred compensation plan. Many small businesses consider offering some form of minority ownership or equity stake. Ultimately, for family succession plan reasons, a general sense of uneasiness, and the permanence that comes with bringing on a new owner, they choose programs that avoid direct ownership. An equity stake certainly creates a common financial incentive to grow the business, but a properly structured bonus plan may accomplish similar objectives while avoiding the legal, financial, and disruption that fractional ownership can sometimes cause. 

In a recent client conversation, our firm had the opportunity to talk through a variety of key employee reward/retention plans available. A non-qualified/non-ERISA deferred compensation plan can be very specific when it comes to participation, performance, loyalty, contribution rules and requirements while still providing some level of employee involvement. The more complex the plans, the more they require external expert advice, ongoing management, and professional record-keeping support. For a large group of key employees, spending time and money on such a plan can make sense. For employers that want something more easily managed for a smaller group of individuals (10 or less), a 162-Bonus plan may be a great fit. A 162-Bonus plan, once in place, can be efficient and internally managed with minimal oversight. The ease of execution and the straightforwardness of the plan can be appealing to both the employer and the employee. 

If you are struggling with the recruitment and retention of your best people or simply want to stay ahead of the pack, a reward program may be the missing piece to your organization’s benefit puzzle. Could a 162-Bonus program be the differentiator that nudges a highly sought-after person to join your team or a key person to reject another employer’s offer? Below are the basics of a 162-Bonus Plan.