'It's a lever that is being used right now with senior-level roles or tough-to-find skill sets'
Organizations have often used cash incentives to lure high-end talent onboard but recent analyses suggests the use of signing bonuses has skyrocketed in 2021.
One recent survey by GlobalData showed an astounding 454 per cent rise in their use over the last year, while another one by recruiting specialist Robert Half found 35 per cent of Canadian firms planned to offer signing bonuses.
Tight labour market
The uptick is “truly a reflection of the tight labour market we’re in and trying to bring in appropriate candidates,” says Elizabeth English, principal at Mercer in Toronto. “Our survey data shows that just over half of Canadian organizations that participated in our compensation planning survey offer a cash sign-on bonus, with the most typical amount being five to $10,000 for a salaried employee.”
The main reason for this seems to be that labour market which is decidedly employee-friendly, says English.
“Candidates are being recruited by multiple firms at the same time so sign-on bonuses are really an opportunity to set yourself apart. It’s a compensation lever that’s really being used right now that has always existed, but not to the same degree.”
As well, bonuses may be a stop-gap measure employed by some businesses that are trying to play catch-up in the market, says Deborah Bottineau, district president at Robert Half in Toronto.
“As the market is becoming more competitive and the war for talent continues to be incredibly fierce… maybe companies haven’t adjusted their salary ranges quickly enough to attract the level of talent and so in some organizations where maybe they don’t have formal approval to hire outside of a salary band or range, we’ve seen some organizations try to close a gap with a signing bonus,” says Bottineau.
While the Canadian figures were not as dramatic, firms are liberally employing them, she says.
“We’re not necessarily seeing an overwhelming move towards signing bonuses to any grand extent but it’s certainly a lever that is being used right now more specifically with some of the senior-level roles or maybe for some of the really tough-to-find skill sets.”
However, they might soon become more popular as companies look toward the end of 2021, says Bottineau.
“Historically, companies have used signing bonuses, particularly where they may be looking to extend an offer to someone who’s generally entitled to a yearend bonus. That can be a time where it can be more relevant if you’ve got a great candidate who you want to onboard before the end of the year, and maybe they’re sitting on a yearend bonus, you may look to a signing bonus to bridge that gap in compensation.”
Pandemic changes
The pandemic is also affecting the job market, according to English, as some companies have suffered more severely by various shutdowns and lockdowns.
“Some industries, it’s just a lot harder to recruit because employees are seeing more risk to leave their firm and to go to something possibly like an airline or hospitality, where COVID is still really hitting those industries hard and employers are looking for more of like a risk premium to make that jump.”
The pandemic has also brought out more soul-searching by employees who are thinking hard about their futures, says Bottineau.
“What this pandemic has done for people is created an opportunity for them to really self-reflect on what it is that they’re looking for in their career and so we’re starting to see some movement afoot but the employee is far more discerning about what it is that they want to make a move for. They’re looking at things like: ‘Does the organization align with my core values?’ They want to make sure that they’re working for an organization that is supportive of their employees and so certainly competitive compensation is important.”
What about incumbent employees?
One of the main risks is what will be the effect on current staff, so employers must adjust bonus programs to include them, says English, or they could risk an exodus out the door.
“Some firms that we’re working with have really increased their use of retention bonuses. They might be offering a sign-on to bring people in but for the people who have been at the firm for a couple of years and are really keeping everything going, they’re now introducing retention bonuses to create that balance and that’s key because otherwise you’re just going to disgruntle the people currently doing the work.”
Employers that demonstrated support during the pandemic were much more likely to retain those workers, found another survey and salary projections for 2022 will be much more modest than this year, according to another survey.
When setting up a bonus structure, its temporary nature might become an anchor for some organizations, says Bottineau, which should prompt a serious look at the impact.
“If you’re using a signing bonus to bridge a gap in salary range or overall compensation, your signing bonus is a one-time payment and so it’s the sustainability of the impact that will have when you try to ultimately retain the employee long-term. The other concern is what sort of precedent are you setting within your organization as far as when and how you may be using that tool to attract talent? Is there an overarching strategy or does it become a bit of a knee-jerk approach at an offer stage?”
Make sure pre-planning is completed before making an offer to employees is crucial, says English, to avoid being caught off-guard when the subject is brought up during a job interview.
“The first one is really knowing in advance what are the critical jobs for your organization… knowing that these might be jobs that you’d want to offer a sign-on bonus and that you’re not reacting if a new recruit asks for one.”
