What is a Signing Bonus + How Do I Get One?

If you’re on the hunt for a new job, you may have heard of a signing bonus.

In addition to a decent base salary, a lucrative signing bonus will give you a little extra reward when you sign on and accept an offer. While many companies provide monetary (cash) bonuses, a signing bonus can take other forms such as stock options or restricted stock units (RSUs). 

What is a Signing Bonus?

A signing bonus is a type of nondiscretionary bonus. This is defined as a pay increase offered by an employer if employees meet certain requirements or specific circumstances that are outlined ahead of time. 

To get more specific, a signing bonus is a financial incentive that an employer offers to an employee when the employee begins a new job. This may come in the form of a single payment, multiple payments over a specified period or stock options. Once the employer issues the negotiated payment for your sign-on bonus, they don’t make any more bonus payments.

When employers offer nondiscretionary bonuses, they designate specific conditions to be met and a set amount or range to be paid. Because a sign-on bonus is a one-time amount, it doesn’t affect your annual salary long term. Instead, it can be considered a financial bump or reward to assist you in the short term.

To summarize, a new employee may receive a lump-sum cash payment or stock options in exchange for signing an employment contract with the company. This additional incentive is offered on top of the employee’s regular salary, bonus, vacation, and any other benefits noted in their agreement. 

Bonuses range in value, however a typical signing bonus may be as much as 10% or more of the potential hire’s first-year base pay.

If you’re interested in a signing bonus, you’ll have to integrate this into your negotiations when you’re discussing your contract/offer with your future employer.

Who Gives Signing Bonuses?

Employers may offer signing bonuses to new hires as a way to make up for any benefits they may lose when they leave their old job. Signing bonuses may also be a means for the company to make up for shortcomings in the overall salary they can offer under their current pay structure.

According to Investopedia, hiring bonuses given in the wake of COVID-19 shutdowns are seen as a one-time cost that the companies will stop offering as soon as they are fully staffed again.

Why Do Employers Offer Sign-on Bonuses?

Employers offer signing bonuses for a variety of reasons, but here are a few of the most common situations:

• Financial incentive to sign a contract
• Compensation for lost benefits when leaving your current job
• Shortcomings in overall salary

Should You Take a Sign-on Bonus?

Keep in mind that while signing bonuses can be incredible support during your hiring journey, there are both pros and cons associated with signing bonuses.

Pros of a signing bonus

For an employee relocating, a signing bonus is a great incentive. It shows that the employer is keen to have you as part of their team. This type of bonus also mitigates some of the stress that moving brings. 

Cons of a signing bonus

When signing bonuses are offered for tough roles, an employee should do their research to ensure that the company isn’t riddled with toxicity. 

Also, employees should read their contracts and offer letters closely to ensure that the bonus doesn’t require them to stay on if things don’t “work out” as expected. In many cases, contracts state that bonuses must be paid back if the employee voluntarily leaves the company within a given amount of time.

Scenario: You’re relocating for your job, and will need to find a place to live, move your belongings, and start a new life in a new location.

Description: A signing bonus is a great benefit to accept when you’re relocating. In this case, the signing bonus is there to help you offset the costs of moving including hiring movers, any fees associated with breaking a lease, or anything else along those lines. In this case, a signing bonus shows that your employer cares and is willing to help assist with the relocation costs. 

Don’t forget to ask about any additional relocation benefits you may be entitled to such as real estate services, etc.

Should You Take it?: YES

Scenario: You’re taking on a salaried role with a lot of ambiguity about the responsibilities and expectations.

Description: Salaried positions can be a great opportunity to gain more control over your schedule, or they can become a nightmare where you are overworked and undercompensated. 

If a prospective company is being vague about your responsibilities, expectations, and the workload, this is usually a big red flag. If they are using a signing bonus to make the package seem more enticing, this could be a sign of a toxic company with low salaries. They may be using the signing bonus to manipulate employees’ expectations.

Should You Take it?: NO

Scenario: You’re leaving your annual bonus on the table by taking a new role at a different company.

Description: Depending on when you find a new opportunity and when you’re able to start, you may have to leave certain benefits on the table at your old role in order to take on the new role.

An example of this is if you get hired during the holidays and have to forfeit your end of year bonus in order to start your new role. If this is the case, many companies will help offset the money you are forfeiting by offering a signing bonus to compensate.

Doing so is a sign that the new company wants you and understands what you are giving up in order to come work for them. This is a win-win situation for everyone!

Should You Take it?: YES

What to Remember About Signing Bonuses

When entering into an agreement or negotiating a bonus, every employee should pay attention to these factors.

1. Taxes: Bonuses are pretty heavily taxed. It’s easy to get blinded by the extra money that bonuses offer, but it’s important to crunch the numbers before getting too excited about how you can spend your bonus offer. If a bonus is part of a compensation package in lieu of a competitive salary, do the math. We have some calculators to help you out!
2. Fine Print: Some bonus structures appear too good to be true because they are. Make sure to read any/all fine print. Also, when starting a job where some of the compensation is performance-based, get everything in writing.
3. Look at All Benefits: Sure, that signing bonus looks delectable, but how about all of the other benefits? Make sure the entire benefits package looks good. Ensure that a signing bonus or annual bonus offer is not a Trojan horse distracting from bad health benefits or other red flags.
4. Always Negotiate: Always, When you’re offered a 7% bonus for every new client you onboard, ask for 10%. Especially when negotiating bonuses, always negotiate. This is your money, so make it count.
5. Return Policy: Finally, we got this tip from Intuit. Re-read that fine print. Make sure that you wouldn’t have to return your bonus in the case of a layoff or if you decide to leave the company before a certain date. These are also negotiable elements of an employment agreement.

How to Find Jobs Offering Signing Bonuses

Many jobs offer sign on bonuses depending on the industry. There’s often no way to tell if a company will offer a signing bonus unless the job postings note this. With this said, there are industries that commonly offer this benefit.

• Healthcare
• Biotech
• Tech
• Marketing
• IT

You’ll want to bring this up in your negotiations to determine if a signing bonus will be possible. 

Different companies may or may not have the resources to offer signing bonuses. Additionally, if it’s not something the company has offered in the past, they may want to stick to this structure. This will allow them to be fair to prior employees who were not eligible to receive a signing bonus.