• Arizona Contractor & Community

Pitfalls to Avoid When Offering Hiring Incentives

Cory Jorbin



It's no secret that the labor market is very tight in specific industries and regions of the country. Currently, the unemployment rate stands at 5.2 percent, which isn't too far off from pre-pandemic numbers from early 2020. In response to the seemingly endless search to recruit and retain talent, employers are now looking for creative ways to attract new employees and keep existing ones. Here are some examples of incentives some employers have used, and others may want to consider.


#1 - Cash is often the first tool at the disposal of employers to try to attract and retain talent. Signing bonuses, increased wages, guaranteed pay increases, and retention bonuses for existing employees are a few of the ways companies can use cash.


Just because cash is "easy" doesn't mean it's without potential pitfalls. For example, offering signing bonuses to employees in certain roles today may foster resentment from employees hired into those same roles in the previous month. Likewise, employers who increase wages for new employees without comparative increases for existing employees in those same roles may see the same result.


#2 - Retention bonuses for existing employees who agree to remain employed until a specific date may help retain existing staff; however, they have a limited shelf life. These agreements essentially buy the employee's loyalty only for a while. Once that time expires, the employee may or may not remain loyal.

Guaranteed pay increases based on tenure could attract some employees, particularly if the positions generally have high turnover and attrition is due to pay. However, employees who separate before a guaranteed raise won't see any benefit from such a program.


#3 - Employee benefits are another tool employers can potentially use to attract employees. Employers can enhance benefit offerings, adjust employee contributions towards benefits, or even offer more generous benefit eligibility. Of course, employers must make sure any changes are compliant with the relevant regulations to avoid risk down the road.


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This article originally appeared in the bimonthly Arizona Contractor & Community magazine, Jan/Feb 2022 issue, Vol. 11, No. 1.