By Jon Rosser
Do you have an offer strategy?
If you plan to hire in the fall or winter, you need to consider how you’re going to deal with annual bonuses.
Most annual bonuses pay in the spring.
If you are pursuing top talent in the fall or winter, they will have earned a portion of their annual bonus with their current employer.
And, in our experience, a lot of hiring is done in the fall!
What is your offer strategy?
How will you get them to walk away from those bonuses?
Here Are 6 Ideas:
- Off-set their annual bonus with a sign-on bonus. If they will earn a pro-rated annual bonus from you, a sign-on bonus to cover part of the bonus they are walking away from might work.
- Take out the “pro-rated” wording in the annual bonus they can earn from you, allowing them the chance to earn a full year bonus. Why would you pay them a full bonus if they’ve only worked at your company for part of the year?
- This approach delays the cash outlay instead of paying it up front in a sign-on bonus.
- It also ties the cash outlay to their performance for your company.
- Guarantee a fixed annual bonus amount for them in that first shortened year. Instead of a sign-on…or instead of taking “pro rated” out of your offer letter, offer a “fixed bonus amount” to be paid in the spring that will help off set the annual bonus they are walking away from.
- Build an off-set amount into their base pay. This will depend on their compensation, what you had budgeted for the hire, etc.
- Offer equity (if applicable to your company)
- Combination: Get creative. It can be a combination of ideas. If you go the sign-on route, it can be split up into a few payments if need be.
These aren’t ideas that we just made up. We’ve seen all of these things happen. These are strategies employers are using to overcome the annual bonus obstacle in the fall and winter.
With many of these options, you can include “claw-backs” for protection, where they new employee pays a portion back if they leave inside a year or two.
Half the battle is recognizing that you will encounter this if you are hiring in the fall and winter. Thinking about it and developing a strategy will help you be prepared and limit surprises.
Speaking of surprises: Be sure to ask candidates about their annual bonuses early in the process when you discuss Comp Expectations (how are you handling that topic?)!
What ideas would you add to the list?