Latest / Hiring & Firing with Fexingo: Recruitment, Performance, and Workforce Decisions / Why One Firm Pays Rejected Candidates to Stay in Touch
Transcript
- Lucas: So there's a mid-sized fintech firm — I won't name them because they're private and the story is told on condition of anonymity — but they had a classic problem. They were losing great candidates to slower competitors, and their time to hire for senior engineers had crept up to almost four months. Luna: Four months is brutal. In that market, the best people are gone in weeks. Lucas: Right. And they tried the usual fixes — faster interview loops, better offer packages, even a hiring manager incentive. Nothing moved the needle. So the head of talent, a woman named Priya, tried something I genuinely hadn't heard before. She started paying rejected final-round candidates a small stipend — think five hundred dollars — to stay in their talent pipeline for twelve months. Luna: Wait, they pay people they didn't hire? That's a new one. What's the catch? Lucas: The catch is they have to opt in, agree to quarterly check-ins, and be open to future roles that match their profile. But here's the thing — the stipend isn't a retainer. It's more like a thank-you for staying on their radar. And the results were striking. Within a year, their time to hire for critical roles dropped by thirty percent, because they had a warm pool of vetted, interested candidates to tap into. Luna: So instead of starting from scratch with a new search, they're essentially re-engaging people who already passed the bar once. That's smart. But why didn't they just use their rejection email to keep in touch like everyone else? Lucas: Because that's exactly the problem — everyone else does that. A generic 'we'll keep your resume on file' email gets deleted in seconds. Priya realized that if they wanted rejected candidates to actually engage, they needed to make it worth their while. And five hundred bucks is enough to get someone's attention without feeling like a bribe. Luna: I can see that. It's like paying for a coffee chat, except it's a year-long commitment. How did they structure it legally? I'm thinking about tax implications and whether this counts as a contract. Lucas: Good question. They structured it as a flat fee for participation, not compensation for services. So it's a one-time payment, taxable as income, but not tied to any promise of employment. The candidate signs a simple agreement that says they're not an employee, they're not entitled to benefits, and they can opt out anytime. It's clean, and they ran it by employment counsel before launching. Luna: And what's the opt-out rate? Because I'd imagine some people are just in it for the cash and never respond again. Lucas: They said about a quarter of candidates who took the stipend went dark after a few months. But the ones who stayed engaged were gold. They'd already been through the interview process, so they knew the company culture. And because they'd been paid, they felt a little more invested in the relationship. One guy who was rejected for a product role ended up joining a year later as a senior engineering manager. Luna: That's a great story, but let's talk about the cost. Five hundred per candidate, and if they're rejecting, say, fifty final-round candidates a year, that's twenty-five thousand dollars. Is that worth it compared to what they're saving in agency fees and lost productivity? Lucas: That's exactly the calculation Priya put in front of their CFO. She showed that the average cost per hire for a senior engineer was around thirty thousand dollars when you factor in agency fees, internal time, and the opportunity cost of the role sitting empty. If the stipend program filled just two roles that would have otherwise gone to an agency, it paid for itself. And in the first year, they filled four roles from that pool. Luna: So the ROI is pretty clear. But I'm curious — did they see any downside? Like, did candidates get offended by the offer? Or did it make the company look desperate? Lucas: Priya said they had a few people who politely declined, saying it felt weird to take money from a company that just turned them down. But most candidates saw it as a genuine gesture. And here's the kicker — their offer acceptance rate went up. Because candidates who had been paid felt like they had a relationship with the company, so when a role did open up, they were more likely to say yes. Luna: It's like the stipend is a signal of good faith. It says, 'We know we're not hiring you today, but we respect your time and we want to stay connected.' That's a powerful message. Lucas: And it's not just about the stipend. They also revamped their rejection emails entirely. Instead of the standard 'we've decided to move forward with other candidates,' they wrote personalized notes that included specific feedback on what the candidate did well and where they could improve. That cost them nothing but time, and it had a huge impact on how candidates talked about the company. Luna: Yeah, I've seen studies that show candidates who get rejected but have a positive experience are more likely to reapply and refer others. So this is really about turning a negative moment into a positive touchpoint. Lucas: Exactly. And the stipend is the hook that makes people willing to stay in that relationship. But there's a broader lesson here about how we think about rejected candidates. Most companies treat them as a dead end. This firm treats them as a warm lead. And that mindset shift is what drives the results. Luna: You know, Lucas, this reminds me of something. A few listeners have asked how we keep this show ad-free and sustainable. And I think it's worth pulling back the curtain for a second — we're listener-funded. A small group of folks chips in monthly through buy me a coffee dot com slash fexingo, and that's what keeps us going without ads. Lucas: Yeah, it's a pretty simple model. No sponsors, no banner ads, just people who find these conversations useful and want to keep them going. We're grateful it works. Luna: Alright, back to hiring. So the stipend program worked, but what about the legal and tax stuff? You mentioned it's taxable — did candidates have to report it as income? Lucas: Yes, they issued a 1099, so it was taxable. But because it was a flat fee, it was easy to report. And they made sure the agreement didn't create any expectation of future employment, so there was no risk of it being seen as a contract. It's really just a gesture of goodwill. Luna: Okay, that makes sense. But I want to push back a little — isn't this just a fancier version of a referral bonus? You're paying people to be in your network, but they're not actually referring anyone. Lucas: That's a fair point, but the difference is the intent. A referral bonus is about getting names. This is about building a relationship with a person you've already vetted. It's not about quantity, it's about quality. And the proof is in the results — they filled roles that were previously taking months to fill, and they did it with people who already knew the ropes. Luna: So what would you say to a hiring manager who's skeptical about spending five hundred dollars on someone they're not hiring? They might see it as throwing money away. Lucas: I'd say, look at the math. If you're spending tens of thousands on agency fees for a single role, and this stipend fills that role in half the time, the ROI is obvious. But more importantly, it changes the way candidates perceive your company. And in a tight labor market, that's worth more than any amount of money. Luna: That's a strong argument. And I guess the key is that the stipend is just one part of a broader strategy to keep the pipeline warm. It's not a gimmick. Lucas: Exactly. Priya's team also set up a private LinkedIn group for past candidates, and they send out quarterly newsletters with industry insights and open roles. The stipend is what gets people to join, but the ongoing engagement is what keeps them there. Luna: That sounds like a lot of work. Is this something a smaller company could pull off, or is it only feasible for firms with a dedicated talent team? Lucas: You don't need a huge team. The stipend is a one-time payment, and the follow-up can be automated with a simple CRM. The bigger investment is the time it takes to write personalized rejection notes and maintain the relationship. But that's not a cost — that's an investment in your employer brand. Luna: I'm curious about the candidates who declined the stipend. Did that create any awkwardness? Like, do they feel like they're being bought? Lucas: A few did, and Priya said they handled it with grace. They made it clear it was a no strings attached gesture, and if the candidate preferred not to take it, that was fine. They still sent them the personalized rejection note and kept the door open. There was no pressure. Luna: That's refreshing. Most companies just ghost candidates after a rejection. This is the opposite — it's almost like a breakup that ends with 'let's stay friends, and here's a coffee card.' Lucas: Ha, that's exactly the vibe. And it works because it's honest. They're not pretending the rejection didn't happen. They're acknowledging it and offering something of value anyway. That builds trust. Luna: So what's the biggest takeaway for our listeners? If they want to try something like this, where do they start? Lucas: Start small. Pick your final-round candidates — the ones you genuinely liked but didn't have a spot for. Offer a modest stipend, like two hundred and fifty dollars, for a six-month commitment. See how it goes. Measure your time to hire for roles that come up in that period. If it works, scale it up. If not, you've only spent a few thousand dollars. Luna: And the key is to do it sincerely. If you're just trying to buy goodwill, it'll backfire. But if you genuinely want to stay connected, it'll show. Lucas: Right. And I think that's the bigger lesson for all of us in hiring. The way you treat people when you say no says a lot about your company. And in a world where everyone's talking about candidate experience, this is a concrete way to walk the talk. Luna: Well said. And maybe the next time I get a rejection email, I'll check if there's a stipend attached. Lucas: Ha, don't get your hopes up. But if you do, you know who to thank.