Are You Sure You Need A Hiring Bonus?

I’m sure you have seen the signs about hiring bonuses.  You may have heard some things about some of the companies putting up the signs. One of the companies I have seen is for customer service reps. Others have been for trucking companies and I just read an article the other day one of the freight trains is using a bonus to encourage people to apply for jobs.  There can be many reasons for using sign-on bonuses but are they really necessary?

Sometimes it is hard to find qualified people for a particular job so sign-on bonuses may be necessary but sometimes organizations say they can’t find skilled workers so they’ll advertise a bonus to try and get specific skills instead of doing any kind of training. Unfortunately, companies have been reluctant to train.  They see training as a big expense despite the additional hiring expense of bonuses.

It also could be a sign-on bonus is needed because it’s related to wages.  If an organization isn’t paying very much or their benefit plan is bad, it may be hard to find people or even keep them once they’ve started.  A lot of companies these days are not willing to raise wages or if they do it’s not enough for people to make a living.  A sign-on bonus can be a lump sum payment or spread out over a period of time but the timing of it is limited and not ongoing like an hourly wage.

When organizations need sign-on bonuses it also can be  a red flag for me as to what’s going on in the organization.  Is the organization needing to advertise a bonus because they can’t retain employees.  Sometimes the hiring signs will reappear every so often.  If they can’t retain employees that becomes a huge burden and cost.  There can be a loss of productivity and customer relations can suffer which can also hurt revenues.  Paying out more and more hiring bonuses can be expensive but it isn’t necessarily as costly productivity and customer loss.

So what can an organization do instead of spending money on bonuses?  Plenty.  For one, they can change the work culture and create an environment where people are respected and their ideas are valued.  That will go a long way in helping to improve retention.  Include people in decision making efforts.  Let them know they are important and sometimes, depending on the wage, people will remain even if the pay is lower than the workplace down the street because they like the culture.

Do some training.  That is an investment all companies need to make.  The people that are needed for certain jobs may already be working or maybe they need follow-up training.  Existing employees have a better idea of the work system, expectations, and a better ability to be productive because of having some knowledge of the work.  Hiring somebody from the outside probably will be a learning curve for many and that, as said above, can hurt productivity.  Somebody who already works for the organization may know customer needs and be ready to help unlike a person coming in from the outside.  Training existing employees for other jobs breeds loyalty, trust and overall satisfaction.

Along with training, is follow-up with employees to support them or help them succeed.  Mentoring or having supervisors sit down and coach employees on their strengths or help them in areas that need attention can also be more effective than hiring bonuses.

Finally, increase wages and  increase the benefit package.  Try a profit sharing plan.  We’ve blogged before about the organization that improved their safety record so much that the owner was able to increase benefits for employees and provide them profit sharing at the end of the year.  Those are the kinds of things employers can do instead of spending money on signs and hiring bonuses.  Overall wages are at the lowest they have been since the 1970s.  The gap between worker and executive pay is at an all time high.  More people may be working but they are struggling to make ends meet.  In central Ohio, United Way has said the need is greater and things are if it was the 1930s.  Nothing has changed.

One other thing about hiring bonuses.  Some employers flash hiring bonuses in front of potential employees with the idea those employees will get the bonus but only if they stay for a certain period of time and even then those bonuses may not be paid in one lump sign.  They may be incremental payments.  Some employees may make those bonuses and that’s great if they do but others may not.

Some may be let go before the bonus kicks in and they are not provided with any kind of explanation as to why they are being terminated.  That only creates suspicion.  Employers need to have a disciplinary plan in place with termination as the last resort.  Employees must need to know what they did wrong, have an opportunity to correct behavior and know the consequences if they don’t correct it.

If an employer advertises a hiring bonus and there is an agreement between the employer and employee as to when and how the bonus will be paid that is okay.  But if the employer has intentionally terminated an employee so as not to pay a bonus that is WRONG.  There are some employers who have done that and no one should work for them.  It is always  important to investigate.

In the end, bonuses may be necessary but it’s important to look at a lot of different things before deciding on them.  They may not always help when it comes to those profit margins.

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About CALMC Blog

Columbus Area Labor-Management Committee is a not-for-profit organization dedicated to involving employers and employees to preserve jobs, resolve workplace issues, and promote labor-management cooperation. Visit our website at http://calmc.org
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