In recent months we have seen increased number of employers across all sectors (including Day Nurseries) offering signing on bonuses, otherwise known as Golden Hellos, to secure new employees.
There are a few things the employer needs to know about these bonuses before this practice is adopted in an organisation.
- Consider whether this is a short term measure. For example if you need to do it to overcome an immediate need for new staff. Are you going to reflect this in the overall package available to the employee? If so, you need to ensure that you are not creating a situation where the same role has different salaries as this can cause long term issues.
- Tax & National Insurance. A “golden hello” is an amount paid to an employee as an inducement to take up employment with a particular employer. Payments are normally made in the form of a cash lump sum. Such a payment is a reward for services about to be rendered and arises as a direct result of the prospective employment. Any payment should be subject to tax and national insurance under the employer’s PAYE scheme, as it represents employment income for becoming an employee. Payments are taxed at the time of receipt. This could impact the employee’s tax bill if it takes them into a higher tax band.
- Will the bonus payment be pensionable? We would recommend that signing on bonuses are not pensionable.
- If you are going to delay the payment of the signing on bonus, what month will you pay it? In their first payroll? If they have to have passed their probationary period it may be around 7 months into the employment that the bonus is paid, will that have limited impact on the decision the applicant makes as to whether they will accept the offer.
- When will you share the details of the bonus and the eligibility? If there will only be a payment if the employee has successfully passed their probationary period and are not serving notice of resignation, this needs to be written into a policy and the employee must have been given this policy, ideally as soon as possible. It may be an appendix to their Written Statement of Terms and Conditions. Any signing on bonus would be included as a benefit in the Written Statement.
- The policy needs to be written in such a way to give the employer the right to vary the terms of the bonus policy in the future, including the right to withdraw the policy.
Finally, whilst these are hitting the headlines now, signing on bonuses are nothing new. You need to value them at the right level too. If they are too low, or the eligibility is too restrictive they may not help you to overcome the difficulty you are experiencing in recruiting. If they are too generous then the existing team may wonder why you are rewarding new staff, when the existing team have been loyal and committed over the long term.
If you have any HR questions, and need some assistance, please do not hesitate to contact us on 01527 909436.