How does a sign-on bonus work?

Should you expect your future employer to offer a signing bonus? If so, how large should it be, and what strings may be attached? Find out here.

How does a sign-on bonus work?

After nailing a few rounds of interviews, you've been offered the job, and now it's negotiating time. Should you expect your future employer to offer a signing bonus? Or should you be asking for a sign on bonus? If so, how large should it be, and what strings may be attached?

Signing bonuses—one-time payments given when an employee begins a new job—are common, but aren't offered to every candidate.

Who gives signing bonuses?

If you're fresh out of school, a signing bonus isn't out of the question, but it's not a given, either. Beyond the college graduate market, signing bonuses are more common: A recent WorldatWork survey found that a growing 76% of employers are using signing bonuses—which can be 5% to 10% of the base salary for middle managers and professionals—to attract key employees.

Why do employers offer bonuses?

To assess your chances of negotiating a signing bonus, consider the reasons employers use them:

  • To beat the competition: A signing bonus is more likely when a company is competing with other employers for the same worker, experts say, especially in fields where demand is strong, such as nursing, accounting or engineering. It can also make a difference whether you applied for a job or were recruited by the company.

    "If they're recruiting you and they really want you, there may be a signing bonus," says Susan W. Miller, owner of California Career Services in Los Angeles.
     
  • To preserve internal salary equity: Sometimes, especially at large companies, you'll ask for a higher salary only to be told it's outside the company's salary range for your level.

    "There might be much less wiggle room in terms of salary," Miller says. In that case, the company might make up the difference—for the first year—with a signing bonus.
     
  • To make up for benefits left behind: If an employer recruits an experienced worker who will lose out on a bonus or other benefits by leaving their job, the employer may use a signing bonus to make up the difference.

Should you take a signing bonus?

If you are offered a signing bonus, make sure you understand the terms. Some require that you pay the company back if you leave before a certain date—a date that may be months or even a year away. Other companies don't actually issue the check until you have been there a certain length of time.

Finally, realize that a signing bonus isn't always your best option. For example, if you're offered a $4,000 signing bonus and you are able to negotiate a $2,000 increase in your annual salary instead, you'd come out ahead if you stayed longer than two years since the bonus is a one-time payment.