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Whitepaper - Signing Bonuses _________
Many IT managers are offering bonuses to convince a key job candidate to sign on. But
who should you really pay these up-front rewards to, and how much?
They are information technology job candidates, and you need them desperately. And like the movie producer who wants a top-notch star to ensure a box-office return, or like the company owner who needs the competitive edge, these IT candidates can bring success to your project. You've got to be creative and innovative in your approaches to attracting these box office producers.
So, before anyone else hires them, you pay a bonus before they even start — a sign-on bonus. In this market of IT as competitive advantage, and facing a large shortage of available talent — which seems to be growing — many companies are using sign-on bonuses to lure those hard-to-get technologists. And this practice no longer seems to be an exception, but rather the rule. Consider some recent examples:
For the sake of the employer, let's hope the person stays on for one full year, knowing now that they can be "bought." Unfortunately, statistics show that 85% of those who accept counteroffers aren't still at that firm at the end of a year. When an employee's priority comes down to a bidding war, loyalty has gone out of the picture. Sign-on bonuses are not part of a new employee's salary, but are just what the name implies: a bonus for just starting on the job. The above-mentioned companies knew the candidates they wanted had other offers. But they needed the worker badly enough that they felt the extra cost was in the best interest of the company. Paying the bonus ensured that these candidates would show up to start work. More and more IT hiring managers and recruiters report they are paying sign-on bonuses for full-time employees. These bonuses can range between $1,000 to $10,000, or sometimes even higher. When firms need skills in this resource depleted job market, sign-on bonuses are prevalent as a new tool. But why has this happened? One word: competition. IT contract agency fees have gone up. What normally was a $12,000 full-time fee has become $15,000. Hourly personnel for consulting firms have raised their rates enormously (in some cases, by over 30%) because of year 2000 incentives. And technical recruiters are aggressively attacking the marketplace to acquire any available talent, quickly. With IT skills demand at a record high, and recruiting challenges also at record levels, salaries and hourly rates have increased dramatically. To compete, while completing projects companies have found sign-on bonuses a way to acquire the IT candidate on staff without paying high agency or hourly fees to get contractors. This also lets the manager keep the actual base salary in a manageable range overall, regardless of the individual doing that job. For less than the cost of a normal agency fee, a company can attract and acquire the permanent job candidate and save money in the process. So, what's wrong with this practice? Nothing, providing that you pay sign-on bonuses only for really key IT hires, and not for every new IT employee you're recruiting. It would be truly scary to think of a new work environment in which companies would have to paying a starting bonus to all employees, just to have them start work every day.
Imagine your boss coming up to you and saying, "I've noticed lately that you are preoccupied with other things and you've been coming to work late the last month. I'd like to give you a bonus for coming to work on time every day. We really need you on this project. You're key." Before starting a sign-on bonus campaign, IT managers should ask themselves a few important questions:
IT managers must constantly train their IT recruiters in effective techniques for attracting, and also retaining, job candidates. This includes knowing a candidate's professional and personal needs for the long haul. You may not so much need the latest gift idea to lure a candidate, if you have better invested those dollars into benefits that better attract and keep an IT professional in the first place. The best way an IT manager can find out their regional market and/or competitors are paying sign-on bonuses is to have their technical recruiters network for that information. There are firms that regularly conduct these surveys, including VIE, Inc. And, this information will state how much are those sign-on bonuses and for what skill sets firms are repaying. Some firms are paying equity (a partnership in the firm, stock options, or a percentage of the firm) to start a person. Equity is given at some future time. Now this seems to me a way to acquire and retain a key employee for the long haul — as long as these companies are using good "retaining" techniques. And equity is not for every employee. Admittedly, companies must do what they can and act quickly to snare good IT talent. Today, with all the different recruiting strategies being used, it's almost playing the lottery to see which one will really work and endure the test of time. Because of the control IT candidates have on the current job market, recruiters have to find the right strategy to compensate for this and control their process. It's becoming a game with winners and losers, with battles and wars. When do you stop just acquiring candidates, but also retain those resources who find the opportunities a right fit and want to stay? Until that happens, recruiters are going to continue to find other means to get control and land candidates. So what's next? What's the next competitive technique? Limos? | |||||||||||||||||||||||||||||||||||||||||
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