Employment Bonuses and Labor Turnover

Arthur Blakemore, Stuart A Low and Michael B Ormiston

Journal of Labor Economics, 1987, vol. 5, issue 4, S124-35

Abstract: The purpose of this paper is to illustrate how a t wo-part compensation system composed of a rigid base salary and a fle xible bonus can reduce turnover. It is shown that bonus pay is an eff ective retention device if it is risk reducing and is correlated with outside contract offers. For the first time, to the best of the auth ors' knowledge, a model of bonus payments is tested with U.S. instead of Japanese data. The empirical results are suggestive of the condit ions that give bonuses an important, even dominant, role in worker re tention. Copyright 1987 by University of Chicago Press.

Date: 1987
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