Friend or Foe? The Sign-On Bonus
Five-plus years ago, sign-on bonuses were rare. They were reserved for only the absolute hardest to fill positions like a RN with a specialized skill set or maybe an OTR trucker willing to deliver to New York City. Now they are far more common, but many employers have concerns about when and how to use them.
Should I consider a sign-on bonus for this role?
Maybe, maybe not. Here are a few questions to ask yourself. If you can answer yes to three or more of them, then a sign on bonus may be beneficial.
Is there a shortage of candidates for this role?
Do I have a high sense of urgency around this hire (like I needed someone yesterday)?
Have I already asked my employees for any referrals and/or considered internal candidates?
Can I offer a meaningful sign-on bonus that will be attention-grabbing for the candidate?
What are the benefits of a sign-on bonus?
Sign-on bonuses are attention-grabbing for the candidate. Imagine a job seeker with an in-demand skillset. He is looking for a job and scrolling through his dozens or even hundreds of options. He sees an ad that has a $2k, $5k, or even $10k bonus – He’s going to read that ad. He’s more likely to click apply and at least explore the opportunity. Job ads with a sign-on bonus do seem to attract more applicants than those without. We have seen searches with sign-on bonuses outperform their counterparts without the added incentive.
When you get to the offer stage, your sign-on bonus might make the difference between accepting your offer or a competing offer without a sign-on bonus.
Sizeable sign-on bonuses can also be broken down into payments that span three, six, or even nine months, serving as an incentive to stick around long enough to be trained and integrated into the team.
How will I communicate the Sign-On Bonus with the team?
I commonly hear, “But sign-on bonuses aren’t fair to my existing team. They are here and working hard every day. Why should the new hire get a bonus?” You are right. Sign-on bonuses really aren’t fair. But hopefully you can remind your team of things like the profit sharing you offer or the pain of having to work overtime because you are short-staffed. You might also point out that a new hire is not eligible for benefits for the first 90 days, so this helps them to offset the costs of COBRA or other expenses associated with transitioning to a new job. It is because you value your current team that you want to do whatever it takes to get the position filled and take some of the pressure off. Different hiring climates call for different strategies. And while it’s not totally fair, a sign-on bonus increases your chances of making a good hire for the team.
Do I have to offer a sign-on bonus at the start of the search?
No. You might start advertising the job to see what the response looks like, then add the bonus into the job ad after a couple of weeks if you don’t get the candidates you are looking for. You can also simply offer it as “icing on the cake” when you get to the offer stage. Assuming you’ve been bold enough to ask your candidates whether they are in the final interview stages with any other employers, you’ll have a pulse on how actively they are job seeking. If they are an A+ candidate likely to receive multiple offers, that sign-on bonus could make your offer more attractive.
In Closing
The labor market is subject to the laws of supply and demand just like products we need for our businesses like lumber, computer chips, and new equipment. When products (or in this case workers) are in short supply, prices go up.
Whether you see sign-on bonuses as a friend or a foe, they are a strategy worth considering for those hard-to-fill roles in your organization.