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THE PROS AND CONS OF COUNTER-
OFFERS
Delaying the inevitable or an investment in retention?
SIGNING BONUSES
A summary of the feedback to our September Issue of the Month.
LATEST COST PER HIRE DATA
A sneak peek at the EMA 1996/97 CPH survey results.
The debate about counteroffers rages on. Some say they are just delaying the
inevitable. Others claim that they are an investment in retention. In today's
very dynamic technical recruitment market, it could be that both sides are
right.
Surveys say that the average technical worker today only stays with an employer
an average of 18 months. Further, the estimated costs of lost revenues and
productivity for each vacancy can run from the tens of thousands to the hundreds
of thousands of dollars. So, the argument goes, if you can keep the employee
for just six more months by paying a few thousand more per month, then you
could make ten or more times that from his or her services. Let him/her go,
and you not only have lost revenues to worry about, but also replacement costs,
training costs, overtime, etc.
Following this line of logic, it would seem that those companies who refuse
to counter offers received by their employees on the grounds that they don't
want "disloyal" employees on their team are not aware of the costs associated
with turnover, nor are they in touch with the transient nature of today's
work force. "Delaying the inevitable" could go on indefinitely if the employer
chooses to remain competitive and responsive to the needs of employees.
Your viewpoint on this issue is welcome and will be printed in a future edition
of this newsletter. Forward your comments to us at: issues@cluffassociates.com
before the end of November for inclusion in the December Recruiters' Update.
Last month, we asked you to share your thoughts and experiences with signing
bonuses. Although most of the respondents indicated that these bonuses are
given on a case by case basis, nearly everyone agreed that, increasingly,
applicants expect some kind of bonus. It may be called a "hiring bonus", a
"cash bonus", or even a "reporting bonus", but rarely is it given prior to
starting employment as a "signing bonus". Here's what we heard from some of
you:
A large commercial I.T. services organization gives a reporting bonus to college
students from the most competitive schools and disciplines. although not everyone
is offered one, top B. S. grads receive $3000 each and MS/MBA's receive $10,000
on the first day of employment.
A large defense contractor pays from $2,000 to $5,000 in the first pay check
as a hiring bonus if they cannot meet salary expectations within their existing
pay ranges.
Another large defense contractor pays an allowable cash bonus six months after
hire to critically skilled new hires. These range from $3-6000, or more in
unique circumstances. The commitment to pay this bonus is communicated in
the offer letter.
A small systems integrator has not used signing bonuses and admits it is having
increasing difficulty in competing for experienced technical workers. They
do provide a $1000 relocation bonus to college students with no receipts required.
If the new college hire has the receipts to prove it, they will pay the actual
relocation expenses even if they exceed $1000.
A government computer services provider pays "whatever it takes" on a case
by case basis. They see this as a particularly effective enticement for the
passive job seeker. This very often is seen as the carrot that seals the deal
with a hot prospect. Their payments are made in the first paycheck.
Thanks to all who willingly gave their comments on this issue. Additional
comments are always welcome.
For fourteen years, Gary Cluff has been compiling the cost per hire survey
for the Employment Management Association. Although later than usual this
year, the 1996 results are in and will soon be published in detail to EMA
members and other participants by SHRM/EMA.
The 1996 survey confirmed the trends we all expected. The average employer
hired 565 new employees during the year, slightly more than in 1995 (553).
The overall cost per hire also rose from $5,086 to $5,404. The Non-Exempt
cost per hire was practically unchanged - - $2,328 vs. $2,356 last year. The
Exempt average cost per hire jumped almost 15% from $8,117 in 1995 to $$9,390
in 1996.
The most significant indicator of the competitive job market is reflected
in the increase in the average cost of an advertisement to net one hire. In
1995, this average was $ 1,882. In 1996, it had jumped to $2,669, and so far
in 1997, it is averaging $3,295 per hire. Similarly, companies report increasing
amounts are being paid to employees for referrals of new hires. The 1995 average
was $288, 1996 was $692, and 1997 to date is $746 per hire. Clearly the supply
problem, particularly in the technical market where much of the growth exists,
is making it more difficult and more costly to find new workers.
On the other hand, it does not appear that many companies have done much to
speed up their recruiting processes in this competitive market. The average
time-to-fill has only dropped from 45 days in 1995 to 41 days in 1996, and
seems to moving back up with 43 days reported as the average for 1997 year
to date.