We know that’s an offensive statement, but it’s not your fault. It’s the system. It’s just the way things have evolved. Most traditional bonuses don’t do the job for which they were created - and yet, you haven’t changed your approach. Why? Because there hasn’t been a reasonable replacement … until now.
First, let’s review where sign-on bonuses came from and what they were intended to accomplish:
Although sign-on bonuses date back to Roman times, the modern-day sign-on bonus originated in the United States in the early 20th century. The first company to offer a sign-on bonus was the Singer Sewing Machine Company, which paid new employees a bonus of $50 in 1913.
The use of sign-on bonuses expanded into many (mainly corporate sector) industries, during the latter half of the 20th century. With increased competition for highly sought-after professionals, companies were looking for ways to stand out and secure the most qualified candidates. Offering a lump sum payment as a sign-on bonus became a popular tactic for companies to entice candidates to accept job offers and join their company.
Over time, these bonuses:
- Typically offer the identical amount from employer to employer. As a result, they don’t spur a candidate to act and join your company. They’re just another component of compensation that has become an entitlement, not a perk.
- Have a period of coverage that doesn’t reach the optimal time frame recognized as a meaningful contribution to the company. Three months? Six months? Twelve months? Research shows that it takes at minimum eight months for a candidate to meaningfully contribute to a new employer.
But, there’s more:
- You're managing your traditional bonuses in spreadsheets or a document
- You’re struggling to collect money from employees that leave early (before the vesting period)
- You’re spending wasted hours correcting W2s when employees leave early
- You’re early paying and overpaying taxes to tax authorities, then having a hard time collecting the overpayments - again, wasted time and money
1/3 of US companies are offering sign-on bonuses and 41% of all U.S. workers have access to nonproduction bonuses. 61% of companies say that the bonuses they offered in 2021 were higher than 2020. And these numbers are just continuing to rise. If more companies are giving out bonuses, and the bonus amounts are increasing, we need to ensure they’re as effective and efficient as possible.
There IS a smarter way.
What if you created your bonuses withinin a SaaS platform that assured easy tracking and a real commitment from your employees - so much so that you can increase sign-on bonus amounts and correpsonding vesting periods. Why would you want to do this? To secure the best possible candidates and ensure their ongoing commitment to your company. With the right people in place, you’ll actually reduce the number of employees you need, reduce the number of bonuses you need to give out, and ultimately accomplish your goals faster.
Keep integrates with your HRIS system to pull in tax information and employee details, lets you build and send custom bonuses based on employee needs and value, helps you customize a vesting schedule, automates communication with the employee for all vesting milestones, and manages all clawbacks (as necessary), and more.
Get in touch with Keep today to learn how to deliver SMARTER sign-on bonuses and attractive, retention-driving compensation at keepfinancial.com