In yesterday’s Advisor, we took a look at some of the benefits of offering a sign-on bonus as an enticement for candidates. Then we started to review some of the potential pitfalls to avoid as well. Today we’ll continue that list of pitfalls to avoid.
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Potential Pitfalls of Sign-On Bonuses, Continued:
- If sign-on bonuses are offered to anyone, it can become an expectation for others. After all, salary information is rarely actually a secret. If existing employees find out that a sign-on bonus was offered, yet they did not receive one, that can lead to resentment from current employees.
- Employers need to treat employees fairly and consistently. Adding sign-on bonuses for some but not all employees opens the door for accidental or unintentional unfairness. When a company does not assess who is (and who is not) getting a sign-on bonus, it’s easy to end up with a situation that appears to be discriminatory on the surface, even if that was never the intent. Like any other aspect of compensation, it needs to be administered fairly, and doing so takes time and preparation.
- It may mask but not eliminate deeper issues. Often, sign-on bonuses are used when something else about the job offer is less than desirable for the candidate—thus the bonus is required as the final enticement. But that does not make the rest of the compensation and benefit issues disappear. If the candidate was unhappy with the total compensation package without the sign-on bonus included, that disappointment could resurface once the honeymoon period ends. In other words, it may not help with retention if it is only masking other inadequacies in the total compensation package.
- Communication is critical to avoid misunderstandings. Obviously, this statement is true of most things, but a bonus carries extra potential for misunderstandings. For example, the new employee may be expecting a check for the exact amount noted and may not realize that even sign-on bonuses must have taxes withheld. Or the employee may be expecting the money before he or she even begins, which may or may not be the way it will work. It’s important to communicate clearly to ensure that the employee will have the right expectations. Given that this is something often used to entice an employee who might not have otherwise joined the organization, getting it right can be critical. If the employee misunderstands, this can lead to bad feelings about the organization from day one.
When recruiting new employees, what tactics do you use to ensure your selected candidate will accept your job offer? Have you considered sign-on bonuses?