This Week's Herman Trend Alert

Leadership in Normal 2.0

  The Herman Trend Alert

October 13, 2004

Bonuses for New Hires

Employers are becoming more aggressive in their pursuit of highly talented employees. Recruiting efforts are being stepped up. Once again, bonuses are being paid to new employees, just for joining the company.

Nothing new, you say? True. The idea of hiring bonuses, which emanated from the highly paid world of professional sports, has been around for a while. Companies have paid recruiting bonuses for years, mostly to fill higher-level positions or jobs requiring rare skills. Soon sign-on bonuses will again become more commonplace. This incentive, pervasive in the late 1990s, is expected to return.

When competition for workers was intense, the Maiden, North Carolina plant of furniture manufacturer Ethan Allen advertised a $500 sign-on bonus for experienced cover sewers. Seamstresses getting $500 to accept a job? Outrageous? A liquor retail store in Jacksonville, Florida, advertised a hiring bonus on its outdoor marquee sign. An increasing number of fast-food retailers offered $50-100 signing bonuses for all positions. When confronted by a labor shortage, hiring even "warm bodies" is a daunting challenge. Executive positions can carry hiring premiums of thousands of dollars.

We expect this practice from the late 1990s to return. Entry-level fast-food jobs are relatively low on the scale of positions. Gasoline service station attendants? Yes, it's already happening. Are we moving into an era where most employees will receive a cash bonus just for taking a job? This trend sets a dangerous precedent that could be extremely costly for employers, including the risk of people jumping from one hiring bonus to another. Smart employers require employees to stay for a period of time before receiving their bonus, sometimes splitting payout into two or three disbursements.

As this recruiting practice becomes commonplace, a hiring bonus will become almost expected in certain market niches. Shrewd employers will combat this sameness with new ideas such as clothing, travel bonuses when eligible for vacations, and payment of commuting costs (some of this is already done). Look for employers to become more creative to inspire prospective workers to choose them, increasingly important as workers make more educated choices about where they want to be.

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