Guest Post by:
Susan Prince
Legal Editor
Business & Legal Resources, Inc.
Sometimes it’s hard to attract needed workers, especially rare- or hot-skills workers. Many employers pay sign-on bonuses to employees with hot skills, often looking upon them as a survival mechanism. In some industries and professions, employers are forced to pay bonuses to compete for workers.
The advantages of sign-on bonuses are that they:
- Can offset demands for higher starting salaries and thus leave the company’s base compensation program intact.
- Can induce workers to relocate to less desirable parts of the country.
- Can persuade workers to make a career move to a new company.
Some of the disadvantages are that they:
- May be unfair to workers already at the company.
- Must be implemented with care to avoid legal challenges.
- Could be a bad investment if the employee leaves soon after hired.
In an organization with a well-established grade structure where internal equity is an issue of faith, sign-on bonuses for new hires who need to be shown the ropes by employees already onboard can help push discontented workers to greater discontent and sometimes even out the door. In a situation where sign-on bonuses are paid to attract workers to special areas of the country or special work shifts, employees who would like to relocate or work different hours may feel the practice is unjust.
One way to structure sign-on bonuses fairly is to also pay retention bonuses to current employees. However, this practice can be expensive and also may “feel” unnecessary to the employer. A practice that is more common and more easily justified is a referral bonus to current employees who refer an applicant who is then hired.
For more on Bonus Payments, please visit HR.BLR.com–Compensation.