Great retention doesn’t come from a single gesture, it’s the result of intentional financial planning, professional development, and culture. In this blog post, let’s break down the three most common financial tools used for employee retention: bonuses, raises, and benefits, and when to use each one.
Bonuses: Motivation or Mayhem?
Bonuses are a favorite go-to for many business owners. They’re exciting, flexible, and feel like a celebration. But when bonuses are inconsistent, delayed, or unclear, they can create confusion and resentment for your employees.
Here’s what most business owners forget: Bonuses aren’t retention tools, they are motivation tools. They give short-term energy but won’t keep someone through a rough quarter or competitive job offer.
If you use bonuses, make them predictable and performance based. Additionally, fund them from a dedicated Profit Sharing account using the STOP Method™ so they never compromise your cash flow.
Raises = Acknowledgement = Loyalty
Raises are the power move in employee retention. A steady, reliable paycheck speaks volumes. It helps your employees’ budget, plan, and feel safe in their daily lives. And when people feel taken care of, acknowledged, and seen? They stay.
But don’t give raises reactively. Tie them to:
- Performance milestones
- Company profit and sustainability
- Your forecasted cash flow for the next 6–12 months
- On the value they have brought to the company
Raise expectations alongside wages. Otherwise, you’re just paying more for the same result. Strategic raises increase loyalty and engagement, especially when they’re backed by clean financial data.
Benefits: The Underrated Retention Superpower
Don’t underestimate the value of non-cash perks. Health insurance, paid time off, flexible work schedules, retirement matching, and childcare stipends all create real-life impact.
Benefits make your team feel like whole humans, not just workers. They support mental health, reduce burnout, and reinforce that you’re in this for the long haul together.
Want to stand out in a crowded job market? Start by improving your benefits package, even if your base pay isn’t the highest.
So…What’s the Best Strategy?
Here’s the honest answer: It’s not either/or on any of these. It’s the right mix, based on your employees, your business model and your budget.
Taking care of your employees will always be the most important (and expensive) part of your budget. That’s how it should be, since they are the ones executing your vision and taking care of your clients.
Knowing what is most valuable to your employees is also important. Some employees want more flexibility while others want higher pay. Some want 401k matches and health insurance while others want unlimited PTO.
Finding the right balance is what matters. Making sure you have the budget to do so is what comes first.
Final Thoughts from Your Favorite Bookkeeper 🧡
If your finances are foggy, it’s impossible to make smart decisions for your employees. That’s why we teach our clients how to use the STOP Method™ to plan for raises, fund bonuses, and forecast benefit costs with real numbers that align with your gut feelings.
✅ Hire us to do your bookkeeping so you know what benefits you can offer and how much you can pay your employees
📚 Want to DIY? Grab my book + workbook on Amazon for step-by-step instructions.
👉 Because at the end of the day, cash flow isn’t luck, it’s strategy.
