Luring the right fish with the right bait

REWARDS: Sign-on bonuses ensure that targeted hires do actually join.

"Quality, quality, quality... we need quality people," companies shout from their rooftops. But the demand for 'quality people' far outstrips supply. As a result, salaries levels (and costs of hiring the right people in a time of rapid churn) are going through the roof.

Having once found people who are the right fit for a job, companies want to make sure they do not lose them. A sign-on bonus is a way of ensuring this. Discreet use of this device is now catching on even among Indian-owned firms; until recently it had mostly been confined to global corporations.

Also, use of signing bonuses as a bait has trickled down from exclusively higher-level appointments to middle-level hires. Firms are beginning to spare no effort in attracting the best talent even at the middle level. But, at the same time, they do not want to woo new talent at the expense of antagonising those already on board. Sign-on bonuses are a way of ensuring that targeted new hires do actually join, without disturbing a firm's salary structure.

Says Samuel Chander, Vice-president, Henkel-Spic India, "When the salary demand does not fit in with the salary structure, sign-on bonuses have to be resorted to. While the salary structure may be within a band, the staggered salary structure helps maintain the status quo."

Adds Monica Kamal, Associate Vice-president (Corporate HR), Solutions Integrated Marketing Ltd, a company that delivers managed marketing services to Microsoft, Hewlett-Packard and other Fortune 500 firms: "Through the offer of a joining bonus, a company buys a commitment from candidates, and beats other companies to the post."

Vibhakar Bhushan, GM (Operations) at Mysis, says the practice of offering sign-on bonuses, though relatively recent, is here to stay. "No firm can afford to let go of a chance to attract and secure the right talent, which in any case is in short supply," says an HR consultant.

Companies often negotiate joining bonuses with prospective hires on a case-by-case basis. What they offer by way of such a bonus could amount to a certain percentage of the targeted hire's current annual salary, or what is required to compensate the new employee for loss of income from not being able to exercise the ESOPs option in his existing employment. To make the offer attractive, firms also pay for any bond that the employee may have signed with the former employer.

Soumen Basu, Executive Chairman, Manpower India, cites an example of the use of joining bonus as a lure. He says a company wanted to hire a person working abroad. Since the asking price was steep, the firm offered a quarterly bonus aimed at compensating for the loss of income on account of the prospect's return to India on a lower salary. This also ensured that he would stick on for a longer period.

With the emphasis now on quality rather than quantity, it is necessary to pay the right incentives to attract the right people and to retain them. This type of compensation goes a long way in doing just that, says Basu.