The Art of the Sign-On Bonus.

Jason Pankow Always Be Closing, Compensation/Cash Money, Jason Pankow, Making Offers

We’ve all had to experience cost cutting exercises in the past few years, right?  Recently, I’ve been reflecting a lot on the usage of sign-on bonuses – that little extra bit of pocket change that we use to sweeten the deal in order to close a candidate.

In the past, when we only suspected that big bank execs were creeps, we had a lot of freedom to use sign-on bonuses.  We would roll out an offer, and a candidate may reply with something like, “Well, let me chat it over with my wife, first,” at which point, faster than Rush Limbaugh responding to an insult, we could be saying, “How about if I throw in a $5k sign-on bonus?”

Okay, so maybe I exaggerate, just a bit.  But, still… I’m sure many folks have seen the use of sign-on bonuses go way down in the past few years as folks have had to look more closely at their bottom line. Maybe you haven’t had the luxury of throwing money around willy-nilly.  I know that we have had to watch what we spend, and it’s been unwise to use a bonus as a means to get a faster acceptance.

Sign-on bonuses can be very useful, however, when trying to close the deal.  Here are some legitimate reasons for pulling them out of your pocket:

  • To bridge a gap.  If what the candidate is asking for and what you are willing to offer is off by a few grand, this is a swell way to make up the difference.
  • To be competitive.  If the candidate is considering another offer that is comparable or even higher than yours.  Some money up front can be enticing.
  • To cover a performance bonus.  Often, when interviewing, candidates won’t want to leave their current company until a certain time so that they can first collect their annual bonus.  If we throw out a sign-on, we don’t have to wait for that.
  • Lost stock.  Candidates may be hesitant to leave a company because they have stock that hasn’t vested yet.  Sign-ons can help with this.

On the flip side, here are some, in this humble recruiter’s opinion, lame reasons for offering a sign-on bonus:

  • Because the candidate wants one.  Really?  And I want the Mariners to go to the World Series.
  • Because another candidate got one.  Each situation is different.  Sure, candidates talk to each other and share their hire stories.  But, they need to remember that what goes for one isn’t necessarily true for another.
  • To help pay off student loans.  I actually had someone ask for this, once.  No.

Anytime you give a sign-on bonus, it’s important to let the candidate know that this is above and beyond.  We shouldn’t make a practice of throwing money around just because someone asks for it.  There should be a purpose around every penny.  Letting them know that they are an exception will help boost their loyalty when they’re finally on the team.

And as I’ve said in the past, and so have some of my FOT compadres, no offers should be all about the benjamins.  If a candidate says that he’ll walk if you don’t fork out some cash, up front, well… maybe that’s a good thing.  If money is the driving force, now, it will be forever.  Whether it’s review time or later on down the road when they are threatening to leave unless you pay more.

People will often ask for them.  It never hurts to ask.  But, if budgets are tight, except for certain hard to fill positions, no is going to be the default.