How to be sure hiring bonuses really help

In the war for talent, companies are doing everything they can. New benefit plans to include pet care, for example, making their remote work plan / hybrid work environment more permanent than a simple pandemic, and targeted discussions with potential candidates on the cultivation of organization are just a few of the offers. Another tool widely used at the moment: bonuses.

Nowadays, all types of bonuses are discussed in business advertising – signing bonuses and referral bonuses are some of the most popular. Look at almost any general job posting online or on social media, and you’ll find that the company offers an additional incentive for employees to come to work. Some may think it’s as easy as just “throwing in more money”, but there really should be more thought to the bonus offer in order to get people to work.

Let’s start with the referral bonus, because honestly, one of the best ways to get great people into an organization is to have those who make it up already bring others. It’s a testament to an organization’s culture because current employees show that they care about who they work, and it also helps strengthen that internal culture. As such, referral bonuses can be very effective in recruiting new employees.

It is also important to consider the offer of a referral bonus from an employee’s perspective, before posting a big ad to use this recruiting tool. In the shoes of an employee, if I sponsor my friend to come and work for my employer, it is my responsibility in this bonus scheme. If my friend is hired, then that’s great, and I fulfilled my role. If the referral bonus depends on my friend working for 90 days, I have no control over it. I do not supervise my new colleague, do not train him, etc. It is not my decision, as a sponsoring employee, whether they stay, or the company keeps them for an arbitrary period related to the referral bonus.

What message does this send to the sponsoring employee if they have to wait almost three months for a possible sponsorship bonus? They fulfilled their part of the requirement by referring an employee, but then lost all control over their ability to receive the benefit. In many cases, this could lead to frustration, confusion and ultimately see this once exciting tool vanish on the vine.

Instead, it could be seen as a phased approach. The referral bonus could be tied to a very short window – possibly during the new hire’s first week of employment (or, if a company wanted to be bold, the first three days). This bonus could be set at an amount and paid promptly to the referring employee as a sign of appreciation for doing this recruiting work on behalf of the organization.

Then take the philosophy behind the longer waiting period that traditional referral bonus structures include – employers want to make sure the new hire is a good fit, and vice versa – and take a second step: a bonus. “Spot” after a certain amount of time, which could be the standard 90 days, as a thank you to the referring employee for bringing a strong employee on board.

As for the bonus amounts, of course, it’s varied. Research would show that some referral bonuses are around $ 500, while others are around $ 50. Think about the amount of the bonus, because what is going to kill the momentum is rolling out a program that doesn’t encourage participation – and if the bonus amount is too low, it won’t work. Going a little higher on the bonus amount could have some advantages: not only will current employees be motivated to participate, but it could help save on the costs of recruiting and filling the position (s). It could also create a situation where a company is inundated with new people to hire (Wow!), in which case you can suspend the benefit as there would be no additional role to fulfill.

Leveraging the network of current employees to train new employees through referral bonuses is just one part of the picture. Another is the signing up bonus. Like a referral bonus, signing bonuses should be large enough to be worth it to a potential employee. Statistics currently show that it takes about 25% pay rise for an employee to move to a new employer, if that person is employed at the time. Signing bonuses can help, without increasing a position’s annual salary and without forcing the employer to commit to a long-term salary.

Signing bonuses can also help attract people to the workforce who haven’t done so for some time. The immediate influx of funds that a signing bonus brings can quickly help those who may need to access the funds. The key, again, is finding that sweet spot of how much it’s worth for the business to hire someone on a quick deadline and set that as the login bonus amount.

Finally, if a company is deploying one or both plans, it is important to think about the existing workforce currently employed. A referral bonus offer will tell members of an organization that their network of potential colleagues is valuable. A signing bonus tells the workforce outside the organization that they are valuable. Don’t forget to tell people who currently work for a company how valuable they are now – and do it with a retention bonus. After all, keeping existing employees should also be a key part of recruiting efforts!

Monica Blackwood is CEO of Westsound Workforce, a recruiting agency with offices in Gig Harbor and Poulsbo.

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