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Signing Bonus

As the fight for talent continues, more employers are offering sign-on bonuses to get employees through the door — even those companies that traditionally didn’t before. Signing bonuses are a way to help your organization incentivize against competing offers to a candidate. Let’s explore why a signing bonus may work for your organization.

What Is a Signing Bonus?

Sometimes referred to as a hiring or sign-on  bonus, a signing bonus is a financial award offered by an organization to a prospective employee as an incentive to join their company.

A signing bonus may consist of one-time or lump sum cash payments and/or stock options. Companies typically offer these types of bonuses to highly qualified job candidates.

Why Offer Employees a Signing Bonus?

There are several reasons why an organization may offer sign-on bonuses. They may want to snag high-quality talent for a position that is in high demand (e.g., nurses) and is hard to fill, or perhaps a candidate is requesting a salary that is well above the set range for the role and a signing bonus will make the company a more attractive option, or the organization may want to create a more attractive total compensation package for a candidate. We’ll explore each of these scenarios below.

Hard to Fill

Competition for clinical, retail and restaurant staff was already tough before the pandemic. The pandemic super charged the need for these roles, adding more pressures on the health care, retail and restaurant industries to staff up.

For these types of positions, a sign-on bonus could be used to entice the applicant to sign on with your organization for the position that you are trying to fill, providing an extra incentive for the candidate to accept your offer.

Attractive Total Compensation

Sign-on bonuses allow organizations to bridge the gap between the salary offered and what the candidate wants. By offering a sign-on bonus, your organization will not incur the annual cost of a higher salary. One advantage is that this is a one time payment and is not a recurring expense.

The Potential Downsides of Offering Signing Bonuses

In addition to pros as to why an organization should offer a sign-on bonus, there are also cons. For example, costs, and employee morale are both cons we’ll explore in further detail below.

Costs 

Cash bonuses can be costly. Be sure to calculate up front whether your organization can afford the bonuses, for how many employees and for how long.

Another disadvantage associated with costs are taxes. Bonuses are a part of your employees’ total income, meaning taxes must be paid by the employee and could potentially add up to higher taxes at the end of the year.

Employee Morale

Be sure to communicate the parameters of the bonus (e.g., eligibility, payout(s) and its frequencies, taxes to be held). Sign-on bonuses simply postpone the pay compensation gap that the new employee initially expected, keeping in mind that the sign-on bonus was used to entice a candidate who might not have otherwise joined your organization. If the employee misunderstood the parameters of the bonus, it could lead to negative feelings about your organization.

How To Create and Advertise a Signing Bonus Program

When implementing a bonus plan, it is important to properly create a plan so that it has the intended benefit for both the employee and your organization. Let’s take a closer look at things to look for when implementing a sign-on bonus plan.

1. Reason for the Bonus

First, you will need to determine your why. Your why is your purpose, it serves as the point of reference.

2. Outline Goals

Outline clear goals ahead of time. Be specific, ensure that the goals are measurable, achievable, result focused and time bound (SMART Goals).

3. Think Like a Marketer

Adopt marketing strategy to amplify your brand and its message. The right marketing strategies can help you attract talent, boost employee morale and, in turn, encourage your current employees to become your biggest brand advocates.

4. Identify Communication Channels

Once you have identified your company’s message you will want to share it. View your communication from the perspective of your future employee and experiment with different platforms to reach new prospects.

5. Meaningful

What, when and how much to give can either incentivize or cause an outcome you don’t want. The amount of the bonus should drive the employee to want to join your organization. Think about the current salary being offered and what a meaningful amount would be compared to that number. For example, if the base salary is $150,000, a $150 bonus isn’t an incentive to join your team.

6. Measurable

Your sign-on bonus plan needs to be measurable. You will need to determine if your bonus drives the right outcomes. Create a way to measure the end results of those who received the bonus. You can do this by reviewing the retention rate of new hires within a certain period. In addition, surveys are a great source for gathering information.

Examples of Companies That Offer Signing Bonuses

There are a number of organizations who normally would not be offering sign-on bonuses who have opted to do so. Below is a list of a few of those organizations.

Amazon

Amazon rolled out its sign-on bonus program in May of 2021 for both warehouse and transportation jobs. New employees could earn up to $1,000.

Ollie Bargain Outlet

The company hosted a nationwide hiring event in June, 2021. In an effort to fill 2,000 positions the company offered sign-on bonuses of $1,000 for an array of positions, from leadership opportunities at its distribution center to truck operators.

Clint Woodman

Supermarket chain Clint Woodman offered up to $1,500 in sign-on bonuses to attract and fill 600 positions. The bonuses were offered to new full-time employees. Employees who referred new candidates received a $500 bonus through its referral program.

McDonald’s

Since McDonald’s is owned by many franchisees’ the bonuses vary, ranging from $200-$500 for new employees and $50 for an interview.

Hilton Hotel

Hilton Hotel is offering hiring incentives for various full and part-time positions, including front desk agents, housekeepers, overnight cleaners and room attendants. Bonuses range between $300 to $1,500.

Questions You’ve Asked Us About Signing Bonuses

How do I know if our signing bonus is working?
Set a criteria to measure your process. A great way to do so is to review those offers accepted as well as your retention rate of those hired.
How much should we offer as a signing bonus?
It depends. Your signing bonus should be reasonable. Factor in the employee’s role, salary and your budget.
How are signing bonuses taxed?
Sign-on bonuses are taxed at the marginal tax rate — taxes paid on an additional dollar of income.
Wendy Kelly

Wendy Kelly

Wendy is a HR professional with over 10+ years experience in both health care and education. She is the owner of Kelly’s HR Services, a full service HR consulting agency. She is also SHRM and HRCI certified, and serves as a HRCI Ambassador.

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