Signing bonuses have a concrete benefit for both the employee and employer, and it’s important to clearly articulate these elements to all stakeholders.
We often get asked about the best practices to make the most of these bonuses and maximize the ROI of the investment. We've got you covered! These are the elements that we recommend when crafting your bonus compensation plan:
1. Make the purpose clear
You’ll want to be clear and upfront about why you are issuing the bonus. This is your opportunity to establish goodwill with the employee and reinforce how important they are to your mission.
2. Establish goals and success parameters
For most signing or retention bonuses, you’ll want to set expectations in terms of ‘tenure’ at your organization, as well as other potential performance goals. Set these ahead of time – and be clear and specific. A good guideline is to use the SMART framework (Specific, measurable, achievable, result-focused, and time-bound).
3. Make it meaningful
The impact of your bonus is going to be determined by how much you are providing, in what format, and when the individual can receive it. Employees certainly have a positive bias for immediate payouts – especially in an era of rising inflation. The amount of the bonus should also be enough to drive the employee to want to join your organization. There’s a little art and science required here – as your bonus needs to a) be in proportion to the salary offered, and b) reflect the supply/demand for talent. For example, if you’re hiring for a $80k driver role, a $200 signing bonus isn’t going to yield the desired results.
4. Use the right channel
Once you have identified your company’s message you will want to share it. View your communication from the perspective of your future employee and experiment with different platforms to reach new prospects.
5. Always be selling
In a tight labor market, companies need to be selling themselves – and this needs to be reflected in your strategy to promote the role. Adopt a marketing strategy to amplify your brand and its message. The right marketing strategies can help you attract talent, boost employee morale and, in turn, encourage your current employees to become your biggest brand advocates.
6. Track and measure
The performance of your issued bonuses needs to be measured to make sure you’re moving the needle of the metrics you care about. You’re offering a cash payment on condition of performance/retention, and there is likely some interesting data related to the employee experience, as well as these mission-critical metrics, that you’ll want to keep your eye on. Over time, you’ll need to internally determine if your bonus drives the right outcomes.