Employers & transfer bonuses: The solution for personnel acquisition?

 How transfer bonuses or hiring bonuses offered by employers can motivate people to change jobs.

Employers & transfer bonuses: The solution for personnel acquisition?

Filling job openings in companies is becoming increasingly challenging in every industry and at all qualification levels. In situations like this, hiring bonuses can help to convince desirable candidates to change jobs.

Too few qualified employees on the market

Increasingly, jobs cannot be filled by unemployed people with the right qualifications. A recent study by the German Economic Institute(IDW) found that, in 2022, there were more job openings for qualified workers than qualified unemployed workers.

This poses a problem for companies, especially when they urgently need to fill new positions or replace staff. The IDW study also indicated that higher wages alone are not a sufficient incentive to motivate potential employees to apply for a specific job.

What is a transfer bonus?

At the same time, the number of job advertisements including hiring or transfer bonuses is increasing. This applies to almost every profession and qualification level.

In itself, the “transfer bonus” is not established concept in labor law. Rather, this generic term describes financial incentives to change jobs, namely to terminate an existing employment contract and sign a new one. Alternatively, terms such as sign-on bonus, welcome bonus or hiring bonus are also used.

What can a transfer bonus look like?

A transfer bonus can be structured in very different ways. As a rule, potential recruits are offered a one-time lump sum payment. However, multiple partial payments or participation in the company via employee stock ownership plans, stock options, etc. are also viable possibilities.

Can transfer bonuses be subject to conditions?

When it comes to transfer bonuses, one particular labor law question frequently arises: Can conditions the attached to a switching bonus and are repayment agreements permissible under labor law?

The answer to this question is: Yes. In fact, it is common practice to link the payment of a transfer bonus (as successive payments) to a certain length of service with the company.

However, the repayment clause may not be arbitrary. In this regard, the principles of the courts for labor issues apply to the limits of effective commitment periods depending on the amount of money granted. The Berlin Labor Court issued a corresponding ruling as early as 2012.

How high is a transfer bonus?

The amount of a signing bonus is determined at the discretion of the employer and potential new employee. In most cases, the bonus compensates for at least the financial disadvantages changing jobs. This refers to relocation costs, loss of special payments, etc. In addition, the amount of the premium also simply depends on the actual supply and demand situation. Yet as a rule, a sign-on bonus often ranges from three months’ salary to an entire year’s salary.

Can a transfer bonus become a problem?

Is a transfer bonus always the best means of recruiting qualified personnel?

While a bonus creates a clear incentive, it should not remain the sole incentive. Because if new employees only follow the call of money, this can cause problems in the employment relationship down the line due to lower morale.

In view of this, companies need to create more than financial incentives and “blindly” hire people who join the company for the bonus.

Even if companies are under pressure to recruit employees, they still need to carefully examine whether candidates are a good fit for the company overall. At the same time, creating appealing working conditions through other options it’s important alongside the bonus as a means of attracting qualified applicants. Building on this, a financial incentive only makes it easier to decide in favor of an attractive new job.

Summary of the key facts:

  • Higher wages alone are not sufficient incentive to change jobs.
  • A transfer bonus can simplify the decision to change employers.
  • Combined with better working conditions or other incentives, a transfer bonus can be an effective option.