We want to start giving out signing bonuses to attract talented candidates to our organization in this highly competitive marketplace. However, we are worried that some may leave before a year is up and we will be shortchanged.
Can we have them sign an agreement that they will repay the bonus if they leave anytime during their first year?
You can have them sign an agreement, but recouping the money will be extremely difficult. Typically, signing bonuses are only given to exempt personnel and you cannot deduct such reimbursements from the wages of exempt employees. Your only recourse may be taking them to small claims court. Deducting the bonus from an accrued vacation payout is permissible, but it is unlikely the individual will have accrued enough vacation to cover the reimbursement upon separation of employment.
Here are some other thoughts:
If you do want to provide some hiring incentive, call it a “stay” bonus instead and distribute the bonus in installments (e.g. quarterly or half yearly) or in a lump sum payment after one year has elapsed,
Provide signing bonuses in smaller amounts to prevent any early departures hurting the business as much. A $2,000 loss may be easier to swallow than a $10,000 loss.
If your budget requires you to mitigate any possible loss of funds in the first year, do not call this hiring incentive a “signing bonus”. The term implies the individuals are eligible for the money for simply quitting their current job and accepting your offer. To require them to give up the money should they have a compelling reason to leave employment, contradicts the intent. After all, they did “sign up” to join your company and thereby qualified for the bonus.
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