The Unexpected Pros & Cons of Sign-On Bonuses
Weigh the risk and reward, Herd suggested—not just the signing bonus, but work-life balance, the company’s trajectory, and your professional prospects. In addition, most employers require employees to stay with the company for at least one year; otherwise, they forfeit or have to pay back the bonus. In Herd’s estimation, the higher the bonus, the longer you have to stay on or pay it back. Crawford agreed that if a bonus wasn’t included in the job ad or offered upfront, ask about a bonus when it’s time to discuss salary.
To bridge the compensation gap and make this transition smoother for both parties, I would be open to discussing alternatives if a higher sign-on bonus isn’t immediately feasible. My primary goal is to ensure that my compensation aligns with the value I bring to the organization. For example, let’s say you are a registered nurse with critical care experience. If hospitals in your area are experiencing staffing shortages, they might offer sign-on bonuses to entice you to accept a position.
Here’s an example taken from a modified version of a real Big Tech job offer from one of my clients. This client was a very experienced software developer with substantial background in embedded systems. This offer is for $210,000 base salary, $400,000 total equity (vesting over four years), and a $30,000 sign-on bonus. They’re offering higher wages, hybrid or remote positions, and unique employee benefits like gym memberships and tuition reimbursement.
Part 4Key Factors That Affect Sign-On Bonuses
Here are a few key factors that affect sign-on bonuses and how they are determined. For example, you might need to promise to work at the organization for a year, or else pay back the full amount of the bonus. If you want to secure a sign-on bonus with your next job offer, here’s what you need to know.
«Don’t, if it will not. Determine your current benefits package worth and share that with them, not just base salary.» First, ask, «What are the benefits with this position? Can you send me a list of those?» If you don’t see a sign-on bonus included, don’t be scared to bring it up. «Be straightforward and ask if there is a sign-on bonus,» Crawford said.
But a business implementing them should consider increasing compensation to existing employees across the board to keep them in-house, as well. If you said you’d give the bonus one month after they start, make sure to run a special payroll at the right time. And if you said they’d receive the bonus via direct deposit, well, pay them via direct deposit. You can do a tax gross-up to give the employee the full promised bonus amount. That way, the amount after taxes is the full sign-on bonus amount (ta-da!). As a result, you can withhold a flat 22% supplemental tax rate for federal income tax.
A sign-on bonus can be an attractive incentive when considering a new job opportunity. It’s a one-time payment you receive when joining a company, which can help cover relocation costs or serve as a cushion while adjusting to a new salary. Make sure you read the fine print on your sign-on bonus paperwork so you can properly negotiate the terms. If you’re accepting a lower salary or the omission of other benefits that you’re used to having at your current job, you need to know before starting the conversation. Leverage this information during the process to let sign on bonus meaning your potential employer know what’s at stake.
Read your employment agreement carefully to understand sign-on bonus stipulations
A generous sign-on bonus can make a job offer more appealing compared to offers from other companies. Some job search boards allow seekers to narrow the search by whether a position comes with a signing bonus. But if it’s not advertised, in general, our experts said you’ll want to ask for a signing bonus after the manager offers you the job and you receive the hiring package. When new employees come in with bonus money, at potentially higher salaries than existing employees, it can inadvertently start a chain reaction of turnover. Ultimately, a company could have to offer even more sign-on bonuses to be required and sink more money into training costs. Although a business can require a potential employee to sign a non-disclosure agreement, it’s very hard to keep that kind of news quiet in a workplace.
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- Employers might offer a flat amount or calculate the bonus as a percent of annual salary.
- For example, in lieu of a sign-on bonus, you might able to get more leverage for a higher salary or higher performance bonus.
- A sign-on bonus can be a powerful incentive when you’re considering a new job opportunity.
- But before you ask for a signing bonus, ensure you understand what a signing bonus entails and whether it could help or hurt in the long run.
This has less of a financial burden for your company in the long run. Handling a declined request for a sign-on bonus during negotiations can be disappointing, but it’s important to approach the situation professionally and strategically. I appreciate your consideration of my request and am eager to discuss this matter further. I am committed to finding a solution that benefits both X Corporation and myself. I look forward to the possibility of joining [Company Name] and contributing to its continued success. Before we finalize the details of my employment, I would like to discuss the sign-on bonus.
Consult with your tax accountant to calculate what a bonus might mean for this year’s taxes. Read up on various sites and job boards to learn more about what other people are getting paid in your field and city, Herd said. You can also research the specific company and industry to find out what is standard, so you know what to ask for and what’s reasonable, Crawford said. You no longer need to be an executive at a top corporation to score a signing bonus—an extra cash boost for agreeing to an employer’s offer. According to the nonprofit human resources association World at Work, sign-on bonuses increased dramatically in the past 20 years.
tips for structuring sign-on bonuses
So, while it might seem simple, it’s worth noting — you’ll want to make sure you have the funds immediately ready to give to your candidate once she accepts your offer. A sign-on bonus can help you attract a candidate who might have competing offers. Negotiating salary with candidates can sometimes be tricky — particularly if you’re extremely excited about a potential candidate, but she’s asking for salary well-above the set salary range for the role. I understand that budgets and policies may limit the flexibility in this regard, but I am genuinely excited about the opportunity to work at X Corporation.
This could be quarterly, or even prorated so that a portion of the sign-on bonus is paid out with each paycheck. As you work to reach an agreement on your sign-on bonus, don’t forget the reason why you’re making this request. You’re doing this to set yourself up for long-term success in your new job. In some cases, negotiating a sign-on bonus may not be possible because the company is unwilling or unable to budge. In these situations, remember that negotiating your sign-on bonus isn’t your only option. You can also come to the table with a request for a higher salary, which may be more appealing since it can be paid out over the course of a year instead of upfront.
Consider this when budgeting and negotiating your salary for the long term. Sign-on bonuses are considered taxable income by the IRS, so the amount you see on the offer letter isn’t necessarily the amount you’ll actually receive. To avoid disappointment, make sure to understand how taxes will affect your bonus. To determine what’s reasonable for your industry, take a look at free salary calculators online.
That means that employers who offer other workplace benefits, like the ability to work remotely, may be less likely to entice candidates with a bonus. It may not make sense for all employers to offer candidates a signing bonus. Again, you might decide to offer the payment to key candidates, during low unemployment and high labor shortages, or to someone juggling multiple offers.
