Do's and Don'ts of Signing Bonuses with a Bookkeeping Manager

Trevor Seip, Manager of Bookkeeping at Ward & Uptigrove joins us to chat about the do's and don'ts of signing bonuses. Signing bonuses are a common recruitment tool in highly competitive industries, and sometimes employers get ahead of themselves when it comes to offering them. Learn what that can mean to you as an employer, and how it affects your new employee, too.

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Transcript

00;00;08;03 - 00;00;33;26
Speaker 1
Hello and welcome to Integrating for Success, a Ward and Uptigrove podcast. My name is Amy Noonan and I will be your host. We're going to jump right in today and I think you're really going to enjoy this episode. The labor market has changed and looks quite different than it did even five years ago. Signing bonuses have become a common recruitment practice in highly competitive industries like accounting and veterinary medicine.

00;00;34;13 - 00;00;59;07
Speaker 1
Perhaps less so now, but some employers were so desperate for staff, they were throwing huge signing bonuses at candidates and in some cases, neither employer nor candidate really considered the ramifications of those signing bonuses. So today we have Trevor Seip with us, the manager of bookkeeping here at Ward and Uptigrove. Trevor has worked as a financial analyst in a variety of business sectors, and he also operated his own successful bookkeeping company.

00;00;59;07 - 00;01;09;04
Speaker 1
Prior to joining Ward and Uptigrove. He's experienced and knowledgeable in a wide array of industries, which is, of course, one of the benefits to having a professional bookkeeper. Thanks for joining us, Trevor.

00;01;10;05 - 00;01;10;27
Speaker 2
Thanks for having me.

00;01;11;24 - 00;01;26;23
Speaker 1
So, Trevor, you're often the one pulling your hair out after one of our clients tells us they offered a signing bonus to a candidate without consulting us. Maybe you could touch on what impacts signing bonuses have on the company and the employer.

00;01;27;26 - 00;01;49;02
Speaker 2
Yeah. Thanks, Amy. Yes. So, yeah, signing bonuses as you indicates, have been a, you know, a widely used tool to bring new employees in and them in this kind of labor market. One. One concern from a company perspective is that you want to sign this person up and pay them right away to kind of secure them, in a sense.

00;01;49;24 - 00;02;11;19
Speaker 2
I mean, what happens generally is that, you know, the recording of this stuff, the stuff happens after the fact. And what happens with that is the you know, the company, you know, has issued this payment to the company or to the employee. And now you've got to figure out how to truly correctly record it in the company's books and it impacts both the company and the employee.

00;02;12;00 - 00;02;33;01
Speaker 2
I mean, as if you are an employee. I mean, typically when you are an employee, if you get a payment to or from an employer, you're required to deduct source deduction, which is CP, EI and income tax. And what happens is typically when a signing bonus gets paid, they usually just take the number from on the contract and make the payment.

00;02;33;01 - 00;02;50;11
Speaker 2
And what happens is, is that then the employer, hasn’t remitted what they're responsible to remit, as well as the employee, hasn’t been responsible to remit what they're responsible to. So it can throw a big wrench into the into how to solve this problem from a company in an employee related standpoint.

00;02;51;07 - 00;03;05;19
Speaker 1
Right. So, I mean, you mentioned the individual receiving them. So, you know, say somebody is offered a signing bonus and they are they don't start employment for six months. You know, what does that look like for them if they aren't an employee at that time?

00;03;06;25 - 00;03;30;15
Speaker 2
Well, yeah. And then technically, when you signed pay a signing bonus, that employee becomes an employee at that point. And even though they're not maybe an active employee at the at the time in the sense they are they are considered to be an active employee. When you pay them that signing bonus because it is it is earnings to that employee.

00;03;30;15 - 00;03;52;13
Speaker 2
So there's no ramification in the sense from an employee employer relationship that you pay somebody and then they they don't actually start active employment for another six or seven months or even two weeks. I mean, that's not the concern is just be when when that person's an active employee, paying somebody a signing bonus does not necessarily mean they have to be inactive.

00;03;52;13 - 00;03;55;06
Speaker 2
But from a payroll related standpoint, they are active.

00;03;55;29 - 00;04;02;23
Speaker 1
Right. Gotcha. So what are your recommendations then, when a business is considering a signing bonus?

00;04;03;09 - 00;04;38;07
Speaker 2
Well, I mean, from my perspective, when you're considering a signing bonus, I mean, it's always important to get a get that feedback from respectable accounting firm, you know, or or somebody else who you feel is important to give you some guidance on that. And payroll related people also provide those that support, not necessarily just the accounting firms, because knowing what the impact to the employee can be can help you save yourself a lot of headaches in the longer run.

00;04;38;08 - 00;05;04;07
Speaker 2
I mean I mean, I always say you can solve the problem after after you've done something, but it is always easier to get that stuff ahead of time before you decide to write that check. And then at least you can know what the impact to you as a company is and what your costs are going to be, as well as making sure that the employee has the right, you know, for their perspective when it comes to their income tax and all their on their tax planning needs.

00;05;04;15 - 00;05;09;07
Speaker 2
It allows all sides of the equation to have a better responsibility of what's going to go on.

00;05;09;26 - 00;05;18;24
Speaker 1
Right? Yeah. Prevention, I think in this situation just makes sense, you know, trying to do things right at the start rather than going back and fixing it.

00;05;19;14 - 00;05;43;03
Speaker 2
Yeah. The other thing I wanted to mention, Amy, is, you know, from from the standpoint of an employer to an employee, I mean, it's it's always it's always are thinking that, you know, paying somebody a bonus is going to help maybe keep them or even bring them on. I mean, sometimes, you know, sometimes that people will think that, you know, paying a signing bonus is going to help them in the long run.

00;05;43;13 - 00;06;11;21
Speaker 2
You know, there is other options and there's other ways that you can look at an employment employee relationship that may be more beneficial to not only you as the employee or employer, but also you as your employee to sort of mitigate what those extra costs are, especially when it looks like you're not going to have that that work, that person working for you for, you know, maybe it's a six month window or whatever the case may be now.

00;06;12;04 - 00;06;35;25
Speaker 2
Now you've got a huge outlay of money right at the start, and you really haven't received any, you know, services or or expectation at that point. I think it's always important to make sure you have a a proper employment agreement and talk to your h.R. Professionals to make sure that they they're on board with what you're kind of doing to make sure that everything lines up with the Employment Standards Act and those types of things.

00;06;35;25 - 00;06;45;22
Speaker 2
So I think that's important. Note to have as well, not only just the payments but also to understand what your responsibilities as employer are and what their responsibilities as employees are.

00;06;46;06 - 00;07;04;08
Speaker 1
Right. And I think that's actually a good point. That ties into a previous episode that we did with Leah about, you know, setting yourself apart. You know, it's not just signing bonuses, but culture and all that kind of stuff. You know, all these things play into when you're looking to bring somebody new and it's not just about the money.

00;07;04;08 - 00;07;27;04
Speaker 1
So I think that's an excellent point. All right, Trevor. Well, thank you so, so much for joining us. I think our listeners will really enjoy this. I know that we have some people in these highly competitive industries who should get some, you know, tidbits of information here. And, of course, if anyone ever has any questions, you can always reach out to Trevor or Ward & Uptigrove in general and we would be happy to help you.

00;07;27;05 - 00;07;28;15
Speaker 1
Thanks again for joining us, Trevor.

00;07;29;10 - 00;07;31;28
Speaker 2
Thanks, Amy.