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i was asked to put together a sign-on form to include guidelines for the sign-on bonus |
| Companies that are experiencing a high rate of turnover often look for more effective recruiting schemes in order to control the high cost of lost labor and transition expenses. The establishment of a sign-on bonus for new employees usually has some immediate results from the supply side but if improperly implemented quickly turns into strong negatives in the near to long-term. Sign-on bonuses are most frequently used as a method of compensating senior management that are sacrificing (or leaving behind) valuable pay elements (stock options, unvested shares, etc.) from their current employer to help them transition to the new hiring employer. In this manner, the sign-on bonus acts as a "make-up" payment for lost assets, and the new employer acquires the debt from the previous employer to make the new hire "whole". In the instance described here, the sign-on bonus is nothing more than an economic inducement for potential hires to join the company. There is no quid pro quo for the new employee. In order to protect the organization from pre-paying for (potential) future employment services, and also create a sense of fairness among current working employees, any sign-on bonus should be both conditional and time-sensitive for the new employees, i.e., that the payment of the sign-on bonus not be effective until at least 90 days (or better yet in two installments following three (3) and six (6) months) of satisfactory employment. This time element protects the company from paying bonus to short time unproductive employees. However, in paying non-exempt employees in this manner, the payment of overtime pay needs to be examined since the sign-on bonus payment would need to be reflected in the hourly rate for the calculation of time and one-half. Perhaps a better recruitment method would be to establish a referral bonus system. It has been shown that new employees introduced to the company by current employees have a far better success rate for continued employment and are usually more productive employees. In this manner, the negative repercussions of the sign-on bonus are eliminated, and the current workforce is rewarded for helping the company staff up and address a strategic business need. |
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