When did clawbacks become “a thing”? As far as I can remember, there have always been strings attached to signing bonuses but now lenders are applying similar rules to income guarantees, sometimes with terms as long as three years. Obviously, the intent is to discourage employees from leaving the company – and if they do leave within a defined period of time – they will be on the hook for a portion of the guarantee that was paid.
While I understand the theory behind this, I know firsthand that often times, employees make the decision to leave a company but feel that they need to stay until their clawback period expires. I doubt very seriously that this is what the company had in mind….an employee just “hanging out” until they no longer will owe the company money at resignation. But is this really someone you want on your team? Someone who is just “coasting” and biding their time until the clawback runs out? Won’t this ultimately cost the company more money in the long run?
Employees should work at a company they feel has a strong value proposition and enough benefits to outweigh what the competition is offering. If they feel handcuffed or trapped, you are not going to see the most productivity from that individual and the whole premise becomes a moot point. I’m not against a graduated re-payment policy for signing bonuses; those sums are generally offered in a lump sum at start date. If the employee leaves in the first six months or so…..fair. However, forced commitments for more than 1 year is ineffective and unreasonable, in my opinion.
Non solicits are rampant in our industry. In previous blogs, I’ve discussed what a double standard this is. Lenders want managers who can bring immediate production with them…and the first thing they do when the employee joins the company is has them sign a non solicit agreement. So….it’s ok to pillage the company the employee is coming from but they sure don’t want it done to them. All the IMB’s that I know of utilize non solicits. Many of the banks do not. However, just as in the case of clawbacks, do you really want employees to work for you that don’t want to be there? Of course, there are a multitude of ways to get around non solicits; I see it happen every day. When a non solicit is violated, yes, the company can sue but unless it’s a large exodus or blatant solicitation with a paper trail, these suits are rarely successful. The attorneys make a lot of money and for everyone else, it just seems like a major time suck. At the end of the day, you really can’t prevent people from working wherever they choose.
What do you think? Do you think clawbacks and non solicits are still necessary in our industry? Are they effective?
