Magazine article Workforce Management

Refining Signing Bonuses

Magazine article Workforce Management

Refining Signing Bonuses

Article excerpt

TheInsider

The payouts are back, and getting mixed results; some firms are taking steps to make them more effective

Billboards offering health care professionals $20,000 signing bonuses, two years of car payments or mortgage loans now dot the highways of Southern California, where Debra Ortega is vice president of human resources at Pasadena's Huntington Hospital. She recognizes the staffing-crisis mentality that feeds ever-larger offers for job candidates in the hospital industry, but she has pulled her organization out of the escalating bonus war.

"We are destroying our own industry with signing bonuses," Ortega says. "At Huntington, we're trying to move away from them completely." She believes that signing bonuses generate job hopping, damage morale among existing employees and exacerbate the financial pressures that eventually lead to hospital closings.

The health care industry has a consistent decade-long history with signing bonuses. Other sectors used signing bonuses during the tight labor markets of the late 1990s, but dropped them during the 2001-2003 downturn. Now signing bonuses are back in a wide range of industries. As labor markets tighten for specific skills, employers are handing out S500 to S100,000 cash upfront to cement deals with new hires for hard-to-fill positions.

Sixty-five percent of employers are offering signing bonuses for IT positions, according to a Mercer Human Resource Consulting survey of 1,350 employers. Almost half are using signing bonuses for sales and marketing and accounting and finance positions. Thirty-six percent of employers are offering them for engineering jobs.

"The use of signing bonuses ebbs and flows with market demand," says Rick Beal, managing consultant at Watson Wyatt Worldwide in San Francisco. But he advises workforce management executives to carefully consider the purpose of the program, which positions will be included and which tools will be used to ensure that the new hires stay on the job. Otherwise, signing bonuses may simply push up labor costs without any return.

BACKFIRES

Signing bonuses help avoid the base-salary bidding wars that drive up costs in tight markets and leave employers with bloated salary budgets in a downturn. But signing bonuses can backfire when they become so uniform among a group of employers that they lose their ability to make one offer stand out from the others, or when they encourage job hopping. "Labor markets in the health care industry are so tight that everyone is fundamentally just handing out more money," Beal notes.

After watching new hires leave as soon as they received their last bonus payment and the decline in morale among existing staff, Huntington froze its signing bonuses more than three years ago and eliminated them for new nursing graduates. "Although sign-on bonuses are common in our industry because of the labor shortages, we find that the practice can almost encourage job hopping from bonus to bonus," Ortega says.

Huntington is pulling money out of signing bonuses and open-position advertising and pouring it into a hefty referral bonus program and benefit enhancements that boost both recruitment and retention for its 3,000 employees. Ortega reports that the hospital is spending millions for benefit improvements that include lower insurance premiums and a concierge service. The hospital's rich benefits package and extensive training programs are aimed at attracting employees who take a long-term approach to career development.

Huntington's most recent 90-day referral campaign netted 60 nursing candidates and 19 new hires. Ortega says that the change in recruiting and retention strategies has produced solid results, with improvements in the quality of hires and turnover and a substantial reduction in the use of expensive temporary and premium-payment labor. The hospital hired 570 new employees in 2005.

Recruiting and HR staff members at Huntington carefully explain to candidates that the hospital's superior benefits package and commitment to training are more valuable than the signing bonuses offered elsewhere. …

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