Bonus in one hand, resignation in the other: the post‑bonus paradox explained

For many organizations, bonus season has quietly become quitting season. In a 2025 survey of 2000 U.S. workers, 48 per cent of those expecting an annual bonus were already considering their exit after the funds landed in the bank accounts.  

For many HR professionals, this comes as no surprise. Turnover during bonus season has become a predictable, and often expensive, spring ritual. With replacement costs averaging more than $30,000 per employee, the pattern carries real organizational consequences.   

Nick Turner and Sandy Hershcovis, professors at the Haskayne School of Business, have spent decades researching leadership, fairness and organizational behaviour. They suggest a bonus alone doesn’t determine if an employee leaves, it affects when they leave.  

"The bonus tends to influence timing rather than intent,” says Turner, Future Fund Chair in Leadership.  “Research and field evidence suggest that by the time employees are waiting on a bonus, many have already decided whether they see a future with the organization.”  

“Bonuses act like a psychological checkpoint,” says Hershcovis, a Future Fund Professor in Management. “Employees often wait for a natural transition moment before making a move. The payout simply provides a clean exit point.” 

In other words, the decision to depart is made long before the bonus payout. If employers hope to reduce turnover at bonus time, they need to focus on what’s happening in their organization throughout the year.   

Employers and employees understand bonuses differently 

Leaders often view bonuses as financial tools. Employees interpret them as signals.  

“Managers tend to think of bonuses as economic instruments,” says Turner, “but employees interpret them as social and moral signals that communicate who is valued, what is rewarded and whether their effort has been recognized.”  

“Compensation decisions communicate status and belonging,” says Hershcovis. “When employees interpret a bonus as misaligned with their contribution or values, it can confirm doubts they’ve already been carrying.”  

That difference in perspective matters.  

Decades of research on workplace fairness show that identical bonus outcomes can produce very different reactions depending on whether employees believe their leaders are competent, fair, and acting with integrity.  

When organizations rely on bonuses to compensate for structural failures or ongoing problems, they can backfire, fostering cynicism and undermining motivation. "The evidence is clear,” says Turner, “bonuses are poor substitutes for day-to-day management quality, fair systems and sustainable work design.”   

People leave when they feel unfairly treated, or when they don’t feel they have a voice. 

How to prevent bonus day from being quitting day 

Turner and Hershcovis share three retention strategies leaders can employ to prevent bonus day from becoming quitting day.  

1. Trust and Transparency 

Trust plays a critical role during bonus season. 

“Trust acts as a buffer,” says Turner. “When employees trust leadership, they are more likely to accept disappointing outcomes as situational or constrained by external factors. When trust is low, even objectively reasonable bonus decisions are interpreted as evidence of bad faith.” 

Transparency in how bonuses are determined becomes especially important when trust is fragile.  

When trust is low, clarity about how decisions are made must be very high. 

2. Focus on the Future 

A bonus reinforces commitment only when employees see a future in the organization.  

“Conversations about role clarity, development opportunities, sustainable workloads and career trajectories,” says Turner, “are especially powerful in the months leading up to bonus season.” 

Employee engagement is critical. “Meaningful work, growth opportunities and manageable job demands matter far more than a one-time payout,” says Hershcovis. 

3. Fairness 

Workplace fairness is central to retention. 

“One of the biggest factors in employee retention is how leaders treat their employees,” says Hershcovis. “Loyalty is relational, not transactional.” 

When employees experience consistent respect and voice throughout the year, a disappointing bonus is less likely to trigger departure. But when fairness has been eroding for months, the bonus can become the tipping point in a decision to leave. 

While fairness in how bonuses are calculated matters, broader interpersonal fairness – respectful treatment, consistency, and employee voice – plays a much more central role in long-term commitment. 

“Organizations often overestimate the motivational power of money and underestimate the power of everyday treatment,” says Hershcovis.  

Turner and Hershcovis agree that a bonus, on its own, is not a good retention strategy. As Turner puts it, “Time-tested fundamentals of good work: predictability, autonomy, manageable workload, and trustworthy leadership are more powerful retention levers.”