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Signing Bonuses



There are pros and cons to "signing bonuses" when your company is trying to lure top applicants, but they can work in your favor if you use them effectively. For example, giving a hot prospect an "exploding offer."

It works like this:  Suppose you find the right candidate for a critical position and offer him the job. He wavers because he's being courted by other companies.

You can offer the candidate a tidy financial incentive to accept your offer quickly - say, within a week. The longer he takes to make up his mind, the less of a signing bonus he'll receive. For instance, you might offer a bonus of $2,500, which drops by $500 a day. So if you extend a job offer on Monday and the candidate doesn't accept until Thursday, the bonus drops to $1,000.

True, the candidate can always choose to sign with another company offering a better bonus. However, conventional signing bonuses are generally made in payments spread out over time.

By comparison, "exploding offers" usually entail cash upfront in a lump sum. This gives your company an advantage. The recruit can sign with one of your competitors for, say, a $5,000 bonus spread over a year's time, or join your company and put $2,500 in his pocket right away. You can underbid your competitors and still come out ahead.

Exploding offers don't work with all candidates. Some candidates feel too pressured so you might want to reserve the approach for people who feel comfortable making important decisions quickly. In those cases, it can help you land the right candidate at the right time.

Virtualex.com Ronald J. Cappuccio, J.D., LL.M.(Tax) 1800 Chapel Avenue West Suite 128 Cherry Hill, NJ 08002 Phone:(856) 665-2121      Fax: (856) 665-9005 Email: ron@taxesq.com  
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