Should your company offer sign on bonuses to attract talented job seekers? Weigh the advantages and disadvantages of a sign on bonus for new employees.
Are you looking for a way to attract talented employees? If so, you might be thinking about offering your candidates a hiring bonus or a signing bonus. What is a sign-on bonus, and how does a sign-on bonus work?
A signing bonus is a bonus that you give your employee just for deciding to work for your company. Different industries offer different hiring bonuses, and different companies have different ways they disperse them.
You might think that a hiring bonus is the best way for you to attract talented job seekers who can help you compete in a difficult field. If you are curious about how a signing bonus works, take a look at a few important points below. Then, make sure you use the best tools for agencies in the field to help you put your company in a position to succeed.
What is a sign on bonus?
If you are wondering how to hire employees right now, a sign-on bonus could be a great way to do so. A sign-on bonus refers to additional compensation that is given to the candidate after he or she accepts the job offer. It is compensation that is provided outside of his or her typical salary or hourly wage.
For example, you might offer an employee an annual salary of $60,000 per year with a $3,000 signing bonus. Your employees will receive the $3,000 after accepting the job. The $3,000 does not come out of the $60,000 that you are offering him or her.
A sign on bonus could be a great option because it might convince someone to sign a contract with your company. At the same time, you must make sure you structure it properly to avoid being taken advantage of while also minimizing your potential liability or exposure.
How does a sign on bonus work?
You also need to think carefully about how you structure your sign-on bonus. For example, you don't want someone to sign a contract just to collect the sign-on bonus before leaving after the first day. Therefore, different companies have different ways they structure their signing bonuses.
For example, you should require your employee to work for a certain amount of time before receiving the signing bonus. Some companies will require employees to work for 90 days before they get the signing bonus, while other companies might require their employees to work for an entire year before they get the signing bonus.
If you think waiting too long to provide your employee with the signing bonus could cause him or her to walk away from the offer, you might want to break it up incrementally.
For example, if you are offering a competitive position a $12,000 signing bonus, you might want to pay your employee an extra $1,000 per month until the $12,000 signing bonus has been paid. That way, you don't necessarily have to give it all to the employee upfront, but you disperse it gradually to convince your employee to stay.
Keep in mind that there are other ways to incentivize an employee to sign with your company as well. A signing bonus is an attractive offer, but you must think carefully about how much money your company can afford and how you structure the bonus. That way, you convince your employee to sign a contract without overpaying or putting yourself in a vulnerable position.
Pros of offering a sign on bonus
There are several significant benefits of providing sign on bonuses to your employees. With so many companies looking for opportunities to hire the most talented employees in the field, you need to think carefully about how you can position your company to succeed in a competitive environment. A sign on bonus is a great way to do so, and by understanding the benefits, you can put your company in a position to be successful.
Some of the biggest benefits of providing your candidates with a sign-on bonus include:
Attractive for candidates with competing offers
The most talented employees in your industry are probably going to have lots of competing offers. You may have a difficult time competing against the other companies in your field. Therefore, you should think carefully about how you can get your company to stand out from the crowd. One of the best ways to do so is to offer sign on bonuses.
Right now, there are a lot of candidates who are struggling to pay for certain expenses. They might be worried that their loans or bills could accrue interest before they have enough money to pay them off. If you provide your candidates with a signing bonus, you could give them the boost they need to cover a lot of financial expenses. It could be exactly what you need to convince that person to sign a contract with your company.
Upfront vs. long-term cost
Instead of offering signing bonuses, a lot of companies think that they have to pay a higher annual salary. Even though paying a competitive salary is a way to convince people to sign a job offer with your company, a salary is a long-term expense. It could handicap your company significantly, particularly if you are overpaying for multiple positions.
Instead, you might want to convince someone to sign with your company by offering sign on bonuses. This is an upfront expense instead of a long-term cost, meaning that it is not going to hold your company down for very long. It could be a way for you to separate yourself from other companies in your industry while keeping your expenses under control.
Sign on bonuses are popular
Today, signing bonuses have become popular, so a lot of candidates expect to see a signing bonus on the offer sheet. If you do not include a signing bonus, there is a chance that your candidate might not consider your job offer at all. Because they have become so popular, and because candidates love to see them, you should consider including them with your offer sheets as well.
One-time payment
Finally, a signing bonus is a one-time payment, not a recurring one. That means that you don't need to worry about the expense of a signing bonus showing up again and again. You can pay sign on bonuses to your employees, get it over with, and move on with your budget calculations. If you want to keep your overhead expenses low while also convincing talented employees to sign with your company, sign on bonuses might be the best way to do so.
There are a lot of benefits that come with offering your employees a signing bonus. Think carefully about the way you structure your signing bonuses. That way, you can take full advantage of all of the benefits listed above.
Cons of offering a sign on bonus
On the other hand, there are some significant drawbacks that come with offering signing bonuses as well. You should think carefully about a few of the drawbacks you may encounter. That way, you can position your company to avoid them.
Some of the drawbacks of offering a signing bonus that you may want to consider include:
Added costs
If you decide to offer your employees a signing bonus, you will accumulate some added expenses. Even though a signing bonus is a one-time payment, it is a significant addition to the offer sheet. If you are hiring a bunch of new employees at the same time, the signing bonuses are going to add up quickly, potentially taking resources from other areas of your business.
Furthermore, it might be an unnecessary expense. For example, you might be able to convince people to sign with your company by providing other benefits, such as free lunch or extra break time. Always consider the added expense of sign on bonuses before you decide to put it on the offer sheet.
Unequal payments for employees
Offering a signing bonus could also create animosity between your employees. Even though companies do not like employees to do so, they are going to talk about their compensation structures.
For example, some of your employees might be upset that other employees got a larger sign on bonuses. Then, there are some employees who might not have gotten a financial incentive at all. They might also be upset about the work environment.
Ultimately, employees are going to be paid what they can negotiate. Some employees are better negotiators than others, which means that you may have some employees that get larger signing bonuses than others. If employees start to find out about this, they could get upset with one another, and the animosity could be turned toward management.
Collect and leave
Of course, you also need to think about employees who will collect and leave. What this means is that there are some employees who will sign with the company only to collect sign-on bonuses.
Then, they may do the minimum amount of work required until the signing bonus fully vests. It could be three months, it could be six months, or it could be a year. Then, after they get the bonus, they simply quit and leave.
If you pay the full signing bonus on the first day, you might have some employees who leave on the second day. This is a potential drawback that comes with offering a signing bonus, and that is why you need to think carefully about how you structure the contract.
Unrealistic future expectations
Finally, if you offer your employees a hefty signing bonus, you could create unrealistic expectations for the future. There are a lot of people who receive sign on bonuses from a company only to believe that they are entitled to future bonuses.
Even though there are some companies that offer annual bonuses and profit sharing, companies are not required to do so. By offering your employees a signing bonus, they may expect that another bonus is coming their way. If they do not get another bonus, they could be upset, and it could have an impact on company morale. Always make sure that employees have reasonable expectations if you offer them a signing bonus.
These are a few of the top drawbacks of offering a signing bonus that you need to consider. It is possible that some employees might expect a signing bonus, but you also need to think about the impact that providing a signing bonus could have on company morale. You might even want to reach out to an expert who can help you figure out a way to structure your signing bonuses to maximize the benefits and minimize the drawbacks.
Is offering a sign-on bonus right for your company?
Clearly, there is a lot to think about if you are considering offering a signing bonus at your company. Even though a signing bonus could help you attract talented employees in your field, it could also create some discomfort in the workplace. Is offering a signing bonus right for your company?
There are several important factors to consider. They include:
Industry
First, you need to think about the industry in which you operate. There are some situations where there are more candidates than there are positions. If that is the case, then you may not need to offer a signing bonus at all.
On the other hand, if you noticed that a lot of other companies in your industry are offering signing bonuses, then you may need to offer a signing bonus just to compete with them. Always take a look at what other companies in your field are doing before you decide to offer a signing bonus.
Budget
You also need to think about your budgetary situation. Do you have the money to offer a signing bonus to potential employees?
Take a look at your current overhead expenses, assess how much money you have to pay your employees, and then decide if you truly have the money to pay your employees a signing bonus. If offering a signing bonus is going to handicap your company, then you might not want to take this path.
Vacancies
You should also take a look at the number of vacancies you have at your company. Do you feel like you are having a hard time hiring people to fill your open positions?
If you can't seem to convince people to sign with your company, then you may want to consider offering a signing bonus. You need to get those vacancies filled sooner rather than later. If you do not fill your open positions, your current employees will be overworked. As a result, they may decide to switch jobs.
On the other hand, if you have an easy time filling your open positions, then you do not necessarily need to offer a signing bonus to your potential candidates.
Other potential options
Keep in mind that there are other ways you can attract talented employees as well. You do not necessarily need to offer a signing bonus.
For example, you might want to offer your employees more vacation time. Or, you may want to offer them better health insurance. You might even want to offer your employees a more competitive retirement package. You need to think about which option is best for your company. There are other ways to sweeten the deal and make your company stand out from the other businesses in your industry. A signing bonus is only one option.
Signing bonus structure
Finally, you should also think about how you structure the signing bonus. If you decide to structure your bonus, you must make sure that you protect the company accordingly. You do not want someone to collect the bonus and leave. How much money can you afford to pay?
Then, figure out how quickly you want to pay that money. Do you want to offer a lump sum? Or, do you want to break it up? Furthermore, when do you want to pay the signing bonus? The answers to these questions will dictate how successful the package is.
Ultimately, the right decision for one company is not necessarily going to be the right decision for yours. Every company is different, and every industry is different. You need to think about what you need to do to position your company to succeed. Offering a signing bonus could be the right answer, but it is not the universal one.
So, should you offer sign on bonuses?
Ultimately, there are a lot of factors that you need to think about if you are considering offering a signing bonus to your candidates. A signing bonus is a great way to convince someone to sign a contract with your company, but it also adds to your overhead expenses. In addition, you must make sure you structure the signing bonus appropriately. You do not want someone to collect the bonus and walk away.
Because there is a lot of competition for talented employees, you need to think carefully about the employee benefits you offer. They could be a great way for you to convince talented employees to sign with your company, which can help you stay ahead of the other businesses in your field. If you are looking for staffing resources that can help you attract talented employees, there are plenty of resources available.
For example, you may want to take advantage of appointment scheduling from Mailchimp. By making life easier for your employees and candidates, you have an easier time hiring the most talented people in your field. Consider taking a look at all of the tools available if you want to put your company in a position to be successful.
