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The price of admission: signing bonuses have their place, but they must be structured to avoid encouraging high turnover in a local job sector.

Article Excerpt
As unemployment numbers drop to levels not seen since the dot-com era, signing bonuses are again on the rise for people with IT and other skills in short supply.

"We are seeing sign-on bonuses become a lot more prevalent," says Ravin Jesuthasan, managing principal in Towers Perrin's Chicago office.

Fortunately, employees are not demanding the $24 million that quarterback Alex Smith banked for signing with the San Francisco 49ers as the top draft pick in 2005. But even by offering relatively low amounts, companies can attract the employees they need to build a winning team.

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"Bonuses allow you to pay a premium to attract individuals without dramatically upsetting your salary scale," says Steve Gross, senior consultant for Mercer Human Resource Consulting in Philadelphia.

Negotiating a Number

There is no hard-and-fast rule for determining when to offer a signing bonus or how much to pay. Companies implement them in a variety of ways.

"Securing acceptance from a candidate is like facilitating any other business transaction; it is a negotiation process," says Layne Buckley, PHR, senior manager of U.S./Asia Pacific Latin America compensation and systems for headset manufacturer Plantronics Inc. in Santa Cruz, Calif. "In general, a signing bonus should be used to help secure acceptance from a candidate or to offset other forms of compensation."

There are two primary factors to consider when deciding whether to offer a bonus and how much it should be. The first is supply and demand, which varies with general market conditions and specific skill sets, as well as individual proficiency.

"Sign-on bonuses became a big part of compensation in the late 1990s during the mad rush to Y2K," says Jesuthasan. "There was a tremendous demand for IT folks who could address that need, and we saw sign-on bonuses go from a relatively nominal and infrequently used tool, outside...