What Is a Sign-On Bonus?

Sign-on bonuses are hiring incentives employers offer to attract new employees, often to positions that can be difficult to fill. They can also be a way to combat employee turnover, as well as attract high-quality employees away from the competition. The bonus can be a lump sum payment, several payments over a period of time, or stock options. 

A sign-on bonus is in addition to new employee benefits and not part of the salary package. Moreover, a signing bonus is negotiable if the employer is open to discussing new terms.

Explore the advantages of sign-on bonuses and why you might want to negotiate a higher or lower amount. 

What is a sign-on bonus?

A sign-on bonus is a hiring incentive to attract new employees to positions that may be difficult to fill or are experiencing labor shortages. Additionally, a company may offer a bonus to attract employees with specific skills. Some employers may offer a signing bonus when they can’t offer a more competitive salary.

A sign-on bonus can range from a few hundred to tens of thousands of dollars depending on the company, industry, and unique role. You might use it to pay off debts, start a savings fund, or even pay for relocation expenses related to your job. 

How do sign-on bonuses work?

When you’ve accepted a position with a company offering a sign-on bonus, your employer will likely provide a written clause stating the terms and requirements. The bonus is typically contingent on the employee remaining on the job for a specified period, such as one year. If separation occurs before the period expires, the employee may be responsible for paying back the bonus.

Some employers may make the required tax deduction and submit the payment for you. Discuss the payment terms with the employer before accepting the position. The contract will likely include how and when you can expect payment. Make sure you fully understand it before signing.

Employee advantages 

A career change can result in costs associated with the transition, such as relocation or travel expenses. The bonus can compensate for lost wages or benefits you have with your current employer if you decide to leave.

A large lump sum payment can benefit you for making long-term investments, such as buying stocks. Conversely, you may want to pay off high-interest student loans or other high-interest debt.

Employers seeking your talents may negotiate a higher sign-on bonus than the original offer. Make sure you understand the value of the skills you bring to the table and how much you're willing to settle for before entering negotiations. 

Employer advantages

Financial hiring incentives can help a company attract and retain skilled employees. Employers can strive to find the most skilled employees to round out their workforce by offering sign-on bonuses. Sign-on bonuses can help attract employees when employers face staffing shortages.

An advantage for employers is the leverage a sign-on bonus can have when the candidate has more than one job offer. The bonus can keep an employer in the competition for the valued skills they seek.

Other employer benefits include the following:

• One-time payment instead of an ongoing expense

• Flexibility to stop or start a sign-on bonus program depending on the difficulty of a hiring period

• Increase in employee retention since many sign-on bonuses depend on employees staying at a company for a certain amount of time or meeting specific goals

Factors that influence employers to use sign-on bonuses

Employers offer sign-on bonuses for various reasons, depending on their needs. For some, a sign-in bonus allows them to close the gap between the salary an employer can pay and the salary the candidate would like. Employers use hiring incentives, such as sign-on bonuses, to recruit top talent. The bonus gives employers a competitive edge to recruit employees with the skills they seek.  

Employee shortages also influence employers to offer signing bonuses. The “Great Resignation” caused several employee shortages, which began during the COVID-19 pandemic. According to economic research conducted by Indeed, signing bonus offers surged over the summer of 2020, and job postings that included sign-on bonuses peaked at 5.5 percent in December 2021. About 5.2 percent of job postings still included sign-on bonuses in July 2022 [1]. Another cause for employee shortages is the baby boomer generation retiring, leaving employment gaps.

Fields most likely to offer sign-on bonuses

You may have noticed signs offering sign-on bonuses in restaurant windows and job market advertisements. The service industry has been affected by employee shortages. Other industries that typically offer sign-on bonuses include:

• Health care

• Marketing

• Education

• Trucking

• Hospitality

• Pharmacy

Negotiation strategies

When you receive a job offer with a sign-on bonus, you can negotiate a higher fee if you feel it’s inadequate. You’ll need to explain why you deserve a higher offer and what skills you bring to the position to warrant a more substantial bonus.

In some instances, you might want a lower bonus amount. The bonus could replace additional benefits or lead to a lower salary. On the other hand, you might have a change of circumstances after accepting an offer that requires you to separate from the company. This would mean paying back the bonus, which could be troublesome if you don’t have the money to cover it. Read the contract carefully so you know the payback options. 

Before agreeing to accept a sign-on bonus and the time commitment, be sure it’s the right offer for you. If the bonus is a trade-off for lower wages or reduced benefits, you may want to reconsider the offer. You can research similar positions to determine what other employers pay, so you have the information at hand if needed. 

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