Incentives - Bonus or Bounty?
Naturally, this requires a lot of consideration regarding how much to pay, when to pay and what kind of requirements and rules need to be established. Fortunately, these recruiting incentives have been around for many years in the construction industry, as well as in the manufacturing, retail and service industries.
Possibly the biggest potential problem is retention — How long will that employee stay on your payroll? You hate to pay out a bonus for an employee who is not qualified for your job or who quits to work for another company. Most of the programs I’ve examined set a written time limit to be sure the employee is qualified and wants to work there. Typically, this probation period would be identical to whatever their company policy requires for any newly hired employee.
Most contractors do not reward an employee if the recruit does not stay on the payroll throughout the probation period. As our skill shortage worsens, some are now bending those rules to “sweeten the pot.” One of my clients has a three-month (90-day) probation and pays 50 percent of the recruiting bonus at the end of the first month. He then pays another 25 percent after two months and the last 25 percent when the probation is complete. He has been doing this for almost four years and likes the results. In that time, seven employees did not finish their probation, but were well worth what it cost the company for those first couple months.
Extra Effort: One of the side benefits of delaying the incentive payment is the extra effort your employee will extend to assure his or her recruit “makes the grade.” This extra effort could easily be classified as mentoring; which is another of those “do” options we highly recommend with every newly hired employee. With the vested interest in a recruiting incentive, you can easily see how mentoring becomes automatic.
I like to go one step further with this retention. Several of my clients offer that very same incentive payment to their employees at the end of each year the recruit stays on their payroll. Here again you simply create an automatic mentoring program with a vested interest for the mentor.
We don’t have a simple answer for how much to pay. Some of you are familiar with the recruiting fees charged by head hunters, which can range from $1,000–$10,000. Some of my clients object to offering any money because it negatively resembles paying a bounty. Their attitude is any good, loyal employee would automatically recruit their friends and relatives without being offered a bounty. Some of these contractors are now changing their attitudes as the labor shortage is affecting their jobsites.
To give you a rough idea of what is now being paid out as recruiting incentives, let me share what some of my clients are offering:
- Free meal at a local restaurant for sponsor and spouse between $50–$100.
- Cash of $50 to $1,000.
- One week’s paid vacation ($500–$1,000).
- Fifty percent of their recruit’s one-week paycheck.
- One hundred percent of their recruit’s one-week paycheck.
Naturally, how much money you wish to offer will depend on your individual situation, circumstances and market area. It really boils down to two basic questions:
- How badly do you need more help?
- What will it take to motivate your employees to go find that help?
You also need to use my cost vs. results decision-making balance sheet. Simply write down what it would cost to initiate and administer a recruiting and retention incentive program. Be fair and include all of the time and effort, as well as actual dollars. You should itemize on a second sheet of paper what will result if you initiate that program, and what it is now costing or will cost you if you continue without it.
You will be quite amazed when you compare those dollar numbers on your two sheets. I want to remind you these are your numbers and not Paul Ridilla’s! I think you will agree this written actual cost comparison eliminates most of the guesswork and gamble involved in making any critical business decision.
Potential Problems: Unfortunately there are a couple more decisions you will face when you initiate a recruiting and retention incentive program. To eliminate any possible misunderstandings or hurt feelings, you will need to consider writing down some basic guidelines:
- Do former employees who quit, were fired or laid off qualify for this bonus? After what period of time has elapsed? Under what circumstances?
- Can you steal (recruit) or proselytize employees who are currently employed by your friendly competitors or clients? You may wish to make a list of those “untouchable” employees to prevent any irreparable situations.
What happens to the retention incentive if a good employee is laid off strictly due to a lack of work?
You may wish to discuss some of these potential problems with your management team to gain their input and cooperation. Try to write as few rules as possible to serve your purpose without putting a “wet blanket” on the entire incentive program.
Whether you decide to use a recruiting and retention incentive program you definitely want to follow some of our other do’s and don’ts for attracting and keeping good help:
- Take good care of your current employees. If they aren’t happy working for you they certainly are not going to encourage their friends to come. You need to examine your EDM (employee development and maintenance) program to assure that your coach is giving personal attention to every member of your team!
- Provide human relations training for all your foremen and supervisors to eliminate those costly demotivators and lessen any possibility of unwarranted employee turnover.
- Offer innovative “Make-A-Good-Life-Not-Just-A-Living” flex-time work schedules that satisfy each employee’s personal desires or commitments and still meet your company’s needs.
- Initiate ongoing after-hour task training to assure every employee on every jobsite has been pre-trained to perform whatever task you expect them to perform. Copy what Home Depot, Lowe’s and the other do-it-yourself centers are doing if you don’t know how to train.
- Provide every employee with the proper tools to do a quality job.
- Use a database skills inventory to assure that you have enough qualified and certified craftsmen to perform what you have contracted on schedule.
- Use piece work or any true merit wage that requires you to “keep score” and reward actual productivity and performance. If the best don’t make the most you won’t attract the best!
- Initiate a formal mentoring program to assist every newcomer to overcome any negative peer pressures and build a successful career with your company.
I’m sure many of you are already doing these basic EDM procedures and enjoying a bountiful harvest of good qualified employees. You may still wish to consider rewarding those employees who extend extra effort to add new employees to your team. You simply need to evaluate how little all of this costs and how much you stand to gain — and then make a good profit-oriented business decision.