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Sign-on and retention bonuses are back - For all employees
Key indicators and the unemployment rate are carefully tracked to determine whether or not the economy is turning around. Now survey results from the nonprofit WorldatWork may indicate that the war for key talent may be heating up again.
In a competitive market getting and keeping the right talent is paramount to a company’s success and organizations use of bonus programs are a good gauge as to the shift in momentum from limited selective hiring to a competitive fight for the best talent in the market.
According to this year’s iteration of WorldatWork’s “Survey of Bonus Programs and Practices” all bonus programs have stopped their downward movement observed since the 2009 recession, with two of them (sign-on and retention) used at higher rates than in any other year of the survey. 74% of North American employers gave sign-on bonuses in the last year, a huge gain from the 54% that offered them in 2010 and the most since WorldatWork began tracking bonuses in 2001.
For many workers, salaries have been stagnant. But more companies are now doling out signing bonuses to employees at every level. While secretaries and administrative assistants won’t see the major bonuses snagged by senior executives, a growing number are being rewarded handsomely just for showing up on their first day of work.
The report finds companies often run three bonus plans–for new hires, for current staff referrals of new workers, and those aimed at retaining people — “to ensure they have the talent necessary to grow their businesses. ” Key talent” doesn’t necessarily refer to the top echelon of the corporation. Employees who are really engaged with the organization, who can help and support and bring meaningful results to the bottom line are critical to a company’s long term success. So, signing bonuses go to office managers and key technical staff as well as proven sales managers and senior executives.
More than one in five (21%) employers among the 811 surveyed by WorldatWork said they increased the number of hiring bonuses they gave out during the 12 months ending in March, while two-thirds said their bonus payouts had held steady during that period. Hiring bonuses are now the most prevalent bonus program, surpassing referral bonuses in which employers pay current workers to recruit new staff. (The research did not cover performance bonuses, stock options, and other variable pay.)
More than one-fourth of employers said clerical staff are eligible for signing bonuses, though those tend to be smaller in size than the money paid to recruit an executive or an engineer. Secretaries and other administrative staff received between $1,000 and $4,999 in hiring bonuses.
Top administrative staff “can be pretty hard to find,” said Jeff Zinser, principal with Right Recruiting, because there’s a greater variety of candidates in personal work values and professional perspective than when a recruiter is seeking an accountant with 10 years experience. “Some want to go to work, have an easy time, and leave. Some do want to move up.” And some are highly-skilled professionals who “are invaluable” to their boss and their employer.
Still, admins receive smaller rewards than other professionals. Companies are most likely to give in-demand professionals like accountants and sales and IT staff hiring bonuses of $5,000 to $9,999, WorldatWork found, though one in five pay sales people $10,000 to $24,999.
Senior management bonuses are the biggest of the lot — with 41% receiving $50,000 or more. Some end up with signing bonuses in the stratosphere. For example, Amgen gave a $2 million signing bonus to its new CFO David W. Meline after luring him from 3M.
Computer and electronic companies and health care firms were most likely to offer sign-on buses, WorldatWork research shows, and publicly traded companies are much more likely to offer sign-on and retention bonuses than are privately-held ones or nonprofits.
Zinser believes bonuses are booming because, in many cases, companies are reluctant to pay newcomers more than their existing staff working similar jobs. Many employees hired in 2010 and 2011 are paid lower salaries because there were more candidates available back then. Now, candidates expect more money. “The signing bonus is often a tool that is used by employers to get around that,” he said. Often it’s between 5% and 10% of the annual salary and “generally based on how badly they need the person.”
“From the company’s standpoint, signing bonuses are a huge risk. It’s money upfront for work that has not yet been done,” Zinser noted. In a couple of years, salary scales may catch up and signing bonuses may become less common, he said.
The relatively flat merit pay increases over the past five years has certainly played a role in the rise of signing and retention bonuses, said Rose Stanley, total rewards practice leader at WorldatWork. Pay raises are certainly on workers’ wish lists but, with a few exceptions for hard-to-fill jobs, employers have been slow to offer big gains.
“They don’t want any other companies coming in and taking their talent away from them, so we’re starting to see retention bonuses,” said Stanley. The share of companies offering retention bonuses doubled from 2010 to 2014, with 51% of employers surveyed offering money to convince staff to stay. Most give out a lump sum, and three-quarters of employers allow for management to determine when and how much of a bonus to give.
Almost three-quarters of employers require current staff to wait to collect their referral bonus until a new hire has been on the job, often between one and six months. Yet many attach no such time requirement for retention bonuses. So far, WorldatWork has found no strong correlation between signing or retention bonuses and employee engagement and retention.
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