What is a Key Employee?

Do you have someone in your organization who is vital to the operation? That is your key employee(s). They may work in sales, operations, production or client services.

Key employees are the ones your customers know when they visit or contact your company. They make the trains run on time, know the history of your operation and know how to solve problems.

Question: Who are the key employees of your business? What would happen to your business, your operation or your customers if they were suddenly not there? This article is to help you keep those key team members AND to help keep them happy.

There is a Great Cost to Losing a Key Employee

The cost of replacing an employee can range from 50% to 400% of their annual salary.

–TLNT

Employees Often Change Jobs to Advance

70% of high-retention-risk employees said they would have to leave their organization to advance their career.

– Gallup

5 Ways to Retain A Key Employee

Number 5 – Give Discretionary Bonuses

Discretionary bonuses are one-time or periodic bonuses. They show employees that they are appreciated and recognized for their contribution. Discretionary bonuses benefit the business owner as they are budget friendly. There is no ongoing commitment that needs to be funded. The amount and timing of discretionary bonuses are up to you, the owner.

This is a good way to show key employees that you value them. But there are other, more effective tactics.

Number 4 – Offer a Performance-Based Bonus Program

Structured bonus programs are more effective than discretionary bonuses. Here, employees are given goals and are paid when these are reached. This lets employees know what they (or their team) needs to do to reach their bonus.

Performance-based bonuses focus employees on goals that are important to the business. It gives team members the feeling of some control over their compensation. That fact and the opportunity for additional compensation both help retain key employees.

Question – What goals in your business would fit a performance-based bonus program?

Number 3 – Profit Sharing

Profit sharing means that key employees are given a share when the company makes a profit. These employees flourish when the company thrives.

This approach gives key employees a sense of ownership without the complexity of offering an actual ownership stake. Employees are encouraged to focus on the company targets and encourages a team approach to meeting those goals. This, combined with the enticement of additional compensation, helps retain key team members.

Number 2 – Offer a Benefits Package

Benefits are one of the main reasons that key employees stay or leave a position. It is difficult to overstate the power of benefits in helping to attract or retain employees.

78% of employees reported they’re more likely to stay with an employer because of their benefits program.

– Willis Tower Watson

Benefits commonly mean a health insurance, a company sponsored life or disability insurance policy and/or a 401K. Health insurance in particular can really tie a key employee to a company.

A benefits package can change the way your employees looks at your company and help you keep your key employees in place. But there are many, many options for benefits programs and each comes with a budget requirement. This can be a highly desirable option for employees but may not be right for every business.

Number 1 – Allow Key Employees to Earn an Ownership Stake

Many key employees have the ambition of being a business owner or of owning a part of a business. Offering an ownership stake can be a powerful enticement to a key employee to stay with your company for the long term.

This step should not be taken lightly and is not right for all situations. It is important to structure ownership stake in a way that protects the business. This type of arrangement should make sure the employee earns their stake and that they maintain their involvement in the business. More than any item on this list, this item requires working with a qualified business attorney. But, if this is structured well and is right for the business, offering an ownership stake can make sure that key employees are around for a long time.

Not Sure What’s Right For You? Contact Us

Consult with Cunningham Law to understand the best options for your situation. With over 20 years of experience helping businesses, we understand all of the right ways to make sure your key employees stay with your company.