Do Sign-on Bonuses Really Work When Trying to Attract Top Talent?

The reopening of the economy after the COVID shutdowns has led to significant dislocation. This includes a tight labor market, which has forced employers to adopt sometimes desperate measures. Like firms throughout the country, Massachusetts and Rhode Island businesses have increased their use of sign-on bonuses to attract top talent. But does this approach work?

Companies are certainly clamoring to find out. The post-pandemic reopening of the economy spurred a massive spike in sign-on bonuses. One survey conducted in mid-2021 showed that about half of all employers used this tactic to attract workers.

The trend has fallen off a bit since that time. However, the ongoing labor shortage has created a lingering need for these incentives. Even now, significantly more companies have turned to sign-on bonuses than before the COVID outbreak.

Does it make sense for you? Given the current economy, do sign-on bonuses represent a valuable way to attract top talent? Here is some information to help you decide.

The pros and cons of using sign-on bonuses

Many companies have turned to a sign-on bonus to compete in a tight labor market. However, whether this represents a viable strategy depends on your particular situation. To help you weigh the decision, here are a few pros and cons of using sign-on bonuses.


Gets You Noticed

Think of sign-on bonuses the way a retailer considers a loss leader — something to get the customer in the door. In this case, you’re trying to sell a potential employee on a job with your organization. A bonus provides an excellent way to get their attention and spark a further conversation.

Can Give You an Edge Versus Similar Employers

A sign-on bonus can represent a crucial tie-breaker if you’re in a competitive industry where every employer offers a similar compensation package. The extra upfront money can sway an otherwise indecisive candidate when choosing between two similar positions.


You Might Attract the Wrong Type of Candidate

Ultimately, you want employees dedicated to their jobs, not mercenaries seeking the highest cash payment. A sign-on bonus might get you more warm bodies, but the strategy doesn’t always attract the best long-term employees.

Little Sticking Power

The candidates considering your sign-on bonus know it is a one-time payment. It may be tough to keep them in place in a hyper-competitive market over the long haul. Or even over the short-haul. You have to watch out for applicants looking to score quick cash and then move on to the next job.

Requires Cash On Hand

Depending on the number of employees you want to bring into your organization, offering a sign-on bonus can be expensive. A wave of hiring can require significant cash on hand. As such, make sure you plan appropriately.

How to get the most out of a sign-on bonus

So far, we’ve looked at the benefits and drawbacks of a sign-on bonus. However, there are ways to maximize the upside while minimizing the risks. By carefully planning how you set up your bonus, you can get the most out of the effort.

With that in mind, here are a few tips to get the most out of a sign-on bonus:

Consider Sign-On Bonuses as a Marketing Tactic

A car dealer advertises cash back at signing. A streaming service gives the first three months for free. A cell phone service provider dangles a great deal on an iPhone for all new customers. A sign-on bonus falls into the same category as these offers.

Think of giving a one-time cash payment to new employees as an advertising ploy, a marketing tactic. You get the candidate interested in the role using the bonus. From there, it’s up to you to make a complete sales job about your company’s value.

Think about Structure

You can mitigate some of the drawbacks of a sign-on bonus by getting creative about your structure. Here are a few tips to consider:

  • Have a method to compute the amount based on experience, position, etc.
  • Combine the bonus with other incentives
  • Hand out the money over time, rather than give it all upfront

Don’t Rely Solely on Sign-On Bonuses

A sign-on bonus can provide a helpful way to fill positions in a tight labor market. However, you can’t lean on this strategy alone, and it should be part of a comprehensive recruiting program if you go in this direction.

To create this overarching hiring plan, you can gain insight through outside experts. A top staffing firm, like ABLE Associates, can give you the guidance you need to find the ideal workers for your business.

Contact ABLE today to upgrade your hiring process.

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