Examining the Relationship between Bonus Pay and Voluntary Turnover

The relationship between bonuses and turnover is far from simple because bonuses not only influence the likelihood of turnover occurring, but also the timing at which they occur. Conventional beliefs suggest that bonuses help reduce the level of turnover; however, closer examinations suggest that such behaviors may simply be delayed, only to reemerge en masse. The current study investigates the turnover patterns surrounding multiple bonus pay periods in a call center context. Consistent with economic and psychological theories, results suggest that employee turnover decreases as bonus payout approaches before increasing sharply afterwards. Moreover, this pattern can also give rise to turnover clusters that are comprised of high performers. Since the extant literature indicates that turnover clusters and quality are negatively associated with unit and firm performance, the timing of bonus pay and its relationship with outcomes of interests should be of central importance when designing incentive schemes.