CEO & Founder of Landed.
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Due to a confluence of events — including the pandemic and record-high unemployment benefits — employers find themselves in one of the tightest labor markets in decades. Candidates have a plethora of options (including gig work or not working at all), and that’s led to frequent ghosting of employers, no-shows for interviews and high turnover among employees.
The restaurant industry is one sector that’s been hit particularly hard. Many restaurants have been forced to limit operating hours or even close completely due to a shortage of labor. According to the National Restaurant Association, prior to Covid, the average turnover at a restaurant was 80%. Now that number is likely to double, with entire staff turning over in a matter of weeks. Employers are in constant recruiting mode just trying to maintain their staffing levels (never mind increase them) even as customers are beginning to return again in droves.
The good news is that paying bonuses can help win over candidates and fill hourly jobs — if you do it right.
Our company, which helps restaurants and retailers find and hire hourly workers, recently analyzed data on 27,000 positions and found that cold outreach messages to candidates that offer cash sign-on or retention bonuses achieve 3x higher engagement than those that don’t (40% response rate versus 13%).
Employers should structure their bonuses carefully. However, if they are too front-loaded, candidates may take the money and run. Here are some specific recommendations for bonus types and amounts for hourly workers (amounts will vary based on region, with East and West Coast employers tending to pay the most):
• Interview bonus: $20-$50 for just showing up to the interview, paid upon interview completion. With no-shows accounting for more than half of interview outcomes at restaurants right now, an interview bonus can be key to getting the best candidates in the door and selling them on why you are an employer of choice.
• Sign-on bonus: $200-$500 for completing orientation. Many employers lose candidates at this stage — especially if your orientation onboarding dates are not scheduled within a week or very quickly after a candidate receives their offer. You do not want to give your candidates a ton of time to job shop your offer around.
• Retention bonus: $500 for staying at role 30 days and another $500 for staying at role 60 days. If you do not offer any other types of bonuses, this is the single most important one. You want to reward employees who have put the time into the role and also promote employee happiness to drive retention numbers up. Tenured employees are very valuable to your business, helping with key areas like training and team culture.
• Sign-on plus retention hybrid bonus: $200-$500 for completing orientation and another $300-$500 for staying at role 30-60 days. If employers have the resources to do so, this is the recommended route to take. After getting high-quality candidates in the door with a sign-on bonus, employers need to keep in mind that in today’s tight job market, poaching is common. The majority of turnover happens within the first month, so the addition of a retention bonus can greatly help overcome this hurdle.
• Referral bonus: $200-$300 for referring a friend who is then hired and completes orientation. We are seeing that these are most effective in an employee’s first month of employment — they quickly run out of people to refer after that.
Our data shows that combining sign-on plus retention hybrid and referral bonuses is the most effective path to driving a high volume of initial hires (2.2x more). Why? Candidates likely prefer seeing the large total bonus opportunity in the sign-on and retention option rather than a smaller total for just the sign-on bonus. This same framework can apply to salaried employees working in the field or in your headquarter offices.
Retention bonuses alone aren’t as attractive as money upfront and make it tough to compete with employers who are offering cash now to hourly workers.
Candidates nowadays are job shopping, not hunting. That means employers need to market themselves as an employer of choice for both active candidates, who are actively job searching, and passive candidates, who are not actively looking but could be lured in by the right opportunity. Bonuses could be a factor in helping employers rise above the noise and compel a candidate to take one offer over another.
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