In the latest Weekly Wright Report:

• Sweetening the Pot: How Employers can Properly Execute Signing Bonuses – read now

Sweetening the Pot: How Employers can Properly Execute Signing Bonuses

Employers finding it difficult to fill vacant positions are turning to signing bonuses to entice applicants. This incentive might bring hesitation, though. Is it right for your business? What’s to stop an employee from accepting the bonus and jumping ship soon thereafter? How can you protect your company while successfully appealing to workers?

Signing bonuses can be an effective recruiting tool, if handled correctly.  Employers may offer signing bonuses so that they are paid out incrementally, over time, to incentivize employees to continue working.  Alternatively, employers who prefer to pay the total bonus up front may require employees to sign an agreement to return the bonus should they leave before a specified period of time. Many state wage payment and collection laws, including that of Maryland, prohibit deductions from employee wages except in specified circumstances. To facilitate repayment and avoid violating the Maryland Wage Payment and Collection Law, an employer also may require the employee to execute an authorization to deduct signing bonuses from the final pay of employees who do not work through a minimum commitment.

Any agreement or wage deduction authorization relating to a signing bonus should make clear any intent to retain at-will employment status. Additionally, depending upon the terms of the signing bonus, it may need to be considered in determining the “regular rate of pay” when calculating overtime under the Fair Labor Standards Act (FLSA) and state wage and hour law.

Employers who consider signing bonuses should confer with counsel to ensure that they are complying with all relevant laws and to avoid legal liability. If your business is looking to bolster its recruitment methods in this way, please contact our Employment & Labor Law Group.

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