Colleges are giving staff pandemic bonuses, a cheaper alternative to raises

Dive Brief:

  • Several colleges in recent months have provided bonuses to their employees as a way to signal appreciation for their work during the pandemic. 
  • These bonuses have occurred at public and private colleges, including at prominent institutions such as the University of Michigan, Purdue University and Middlebury College.
  • While the payments might generate goodwill among staff, they are also far cheaper than traditional raises. Some colleges offering them have also increased salaries.

Dive Insight:

Offering bonuses in lieu of raises is a common business practice, and one that can be more economical for employers. That’s largely because bonuses are a one-time commitment instead of a recurring cost, Robert Kelchen, an educational leadership and policy studies professor at the University of Tennessee, Knoxville, said in an email.

This type of compensation can also help motivate employees and is “a nice gesture to make that doesn’t lock in future spending,” Kelchen said. He thinks bonuses will become more common in higher education because they recognize employees while preserving financial flexibility. 

“But I would choose a $500 pay raise over a $1,500 bonus every time,” Kelchen said. 

U of Michigan and Michigan State University are both providing $1,500 extra to most of their employees, to be financed with university reserve funding. While Michigan State also carved out three additional personal days and extended a 2% pay raise to nonunionized faculty and academic staff hired before June 30, U of Michigan pledged a “modest merit salary increase program” for fiscal year 2022.

Both institutions’ leaders in statements noted strained finances brought on by the pandemic. 

Purdue, in Indiana, is offering $500 bonuses to every full-time employee hired before Sept. 1. Part-time employees will receive a prorated amount. More than 15,000 staff members will receive the extra money. Purdue also made available a 4% salary merit pool, with a separate 1% funding pot for “specific workforce objectives,” such as paying for entry-level service staff and graduate student stipends. 

The university gave $750 employee bonuses last year. 

Middlebury College, a nonprofit institution in Vermont, last month announced $1,500 bonuses for employees eligible for benefits who started before July 1, as well as two extra days off. 

While the college struggled financially during the pandemic, its endowment grew by more than 37%, helping offset a budget deficit. Many large college endowments have skyrocketed in the robust stock market.

And in Iowa, trustees at Cornell College collectively donated about $350,000, ensuring many of the private nonprofit institution’s employees would each receive a $1,350 bonus. The college paid the bonuses in October.

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