The business aviation industry is abuzz about compensation and its relationship to the pilot shortage, and one thing we can be certain of is that this issue is not going away anytime soon.

Correspondingly, here at API, we’ve been doing our fair share of compensation consulting with our clients (mostly corporate flight departments). And they want to know how they compare to the airlines and other business aviation entities.

So, it’s time to think outside of the box and take action. It’s time to talk about the ways and means of creative retention strategies.

And I’m not talking about typical retention bonuses. In my opinion, they just don’t work.

I’ll try to tell you why.

So Just What is a Retention Bonus?

Retention bonuses are a special kind of performance pay. They’re generally given in a 6- to 12-month period and approved by a company’s compensation department.

Think of it as a short-term carrot—a way to encourage key employees to stay.

These “balloon” payouts are often used when there’s a merger or acquisition at stake.  But, during the current pilot shortage, we find that retention bonuses are becoming more common as a way to compensate at-risk employees.

For example, a senior captain might be offered an extra $12,000 if he or she stays for another six months. It’s typically a lump-sum payment received on the deadline.

But I happen to think this type of lump-sum bonus sends the wrong message.

To me, it says “We value your experience, and know you could be paid more elsewhere, but this is the best we can do for now. Please hold on for another six months.”

If this sounds at all familiar to you and you know your compensation plan is not ideal, it’s time to fix it.

Plead Your Case

What you first should do is educate to your HR and/or Compensation departments and explain what you’re up against.

Help them to see the long-term vs. the short-term gain of having your team hold on and stay at their jobs because you (and probably they) know your comp packages are not competitive enough. (Below we’ll share links to articles we’ve published to help in the education process).

Because here’s what will likely happen after those six months: several of your employees will do like the Steve Miller Band says and “take the money and run” to a higher-paying company.

And, they may even do it on the day after they get their payout. Then you’re out the $12K and need to rehire—and often at higher wages.

In fact, this somewhat logical occurrence is happening right now.

I recently had a pilot call API to tell us he was “available” after a certain date because that’s when his retention bonus check would be delivered. So, in the interim, he was effectively looking for his future employer while collecting perks from his current one.

Get Creative

If you feel like you’re losing staff to other flight departments or to the airlines, it’s time to get creative. That means you have to dangle the right type of “carrot” if you want key personnel to stay put.

Think beyond mere compensation.

Give your team the things they really crave: more work/life balance, a better schedule, more growth advancement, education and exposure and perhaps more “influence”—or ownership—on key projects.

In 2017, NBAA’s Business Aviation Management Committee conducted a workforce retention study to find out what pilots were citing as their key reasons for leaving the business aviation industry for the airlines.

The number one reason, according to the survey, was predictability of schedule. In addition to competitive wages, the study found pilots wanted better retirement benefits and perceived job stability.

But, at the end of the day, if money is the only thing that talks, and you cannot get additional standard compensation approved, I recommend using a retention bonus only if you spread it out over a longer time period. Note: A “retention or competitive allowance” is similar to a cost of living allowance.

Want a Vested Interest? Think Vesting!

Make your retention program a multi-level approach to include compensation that vests over time. Why? Because it’s hard for anyone to stomach walking away from money they earned.

Companies that utilize vested compensation strategies create a “silver seat belt” to help secure loyalty.

For example, take that $12K annual retention bonus I mentioned and give them $461 every month in their paycheck as a competitive allowance. This reminds each employee on the bonus plan that you value their loyalty.

And, while it’s not a raise per se, it’s also not going to encourage “hanging on until you get the big carrot, and then leaving.” But if and when market conditions change, and they will, you can adjust compensation rather than “right-size” as we saw not so long ago.

Better yet, make it a multi-level approach, offering them $30K that’s vested over three years. That way, if the employee walks, they’re likely to leave tens of thousands on the table, which will seem like a “lose-lose” proposition to anyone who thinks it through.

Keep faith: the market will eventual return to some normalcy. So, if you do set up vesting programs on a temporary basis, you won’t be in a position to overcompensate over the long term.

And remember that a short-term strategy may do nothing for your flight department regarding employee engagement and productivity. If a pilot is looking for the big bucks elsewhere, there may be nothing you can do to satisfy that need. And, in certain cases, you may be just as well to search for someone who presents a better cultural fit.

Your Turn

What has your experience been giving or receiving bonuses? Please share your experience with us in the comments below.

Useful Links

As mentioned above, following are popular shortage-related articles that may help you educate your HR and compensation partners:

Pilot Shortage: How We Got Here & What’s Next

How A Fortune 100 Bizav Leader Secured 1 Million in Pilot Compensation

The High Cost of Pilot Turnover

 

 

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