Companies looking to attract and retain top talent are pulling out all the stops.
They’re offering higher wages, hybrid or remote positions, and unique employee benefits like gym memberships and tuition reimbursement. And during the hiring process, they might even offer a sign-on bonus to entice potential new employees.
If you’re searching for a job, a signing bonus is an exciting indication that an employer is eager to hire and onboard you. But just because a company offers you one doesn’t mean you should take it — at least not immediately.
Your offer for a sign-on bonus can look great on the surface, but it could be masking other issues with the job that may not be favorable in the long run, like a lower base salary or high turnover. Before accepting any offer, think about the pros and cons and accept perks that excite you.
What is a sign-on bonus?
A signing bonus is a monetary reward that employers offer when someone accepts a job. This bonus may come in the form of a lump sum payment, multiple payments over time, or company stock options that hold significant value. Whatever the terms of the bonus, its purpose is usually to create a more competitive recruitment process and attract qualified employees.
Sign-on bonuses are most common in industries that periodically face employee shortages. In 2022, The Wall Street Journal reported that Walgreens was offering bonuses of up to $75,000 because there weren’t enough pharmacists in the market. And according to Indeed, signing bonuses for other healthcare professions generally surged in the summer of 2020 due to the pandemic.
But these bonuses appear anywhere, depending on the company, the position, and the state of the market. If you’re choosing between two jobs or are a competitive candidate, you can even negotiate a signing bonus to sweeten the deal.
How do sign-on bonuses work?
Sign-on bonuses usually work by adding a lump-sum payment to your job offer, and you receive it after you formally accept. In certain cases, you may get a portion of the bonus upfront with the rest after a probationary period, during which the company decides whether they want to retain you. The hiring bonus could be anything from a few hundred to a few thousand dollars, but it isn’t part of (and shouldn’t affect) your annual salary at the new company.
Like your other employment income, sign-on bonuses are taxed. Both your one-time payment and any added to your paycheck count as supplemental income, which means you do have to pay taxes on them.
Some bonuses also come with a confidentiality agreement that prohibits you from discussing it with others. And if you quit the job within a certain period of time, you may have to return all or a prorated portion of the sign-on bonus to the company.
With the above in mind, pay attention to your hiring contract when you sign on. It should include the terms of the bonus — like when you’ll receive it and any limitations — so read it carefully. You should know what to expect and ask any questions before you formally accept the offer, which will help alleviate new job anxiety and set you up for success.
How to negotiate a signing bonus
When preparing for a new job, you don’t have to accept the offer you get — but you can ask for a signing bonus if it wasn’t originally on the table.
If you have specialized skills, are deciding between jobs, or might lose a few weeks of income to start this position, it’s more than acceptable to negotiate your job offer and ask for more incentives. Hiring managers are used to negotiating with potential employees, so don’t be afraid to ask for what you’re worth. The worst-case scenario is that they say no.
But making a counteroffer is about more than a conversation. Planning ahead and knowing what you want is key to successful negotiation. Here’s how to ask for a signing bonus:
1. Articulate your value
The first step is to let the company know what you’re worth, reiterating your experience, skills, and relevant accomplishments. Articulating your value shows self-awareness and lets the company know you’re an asset. Here’s what to consider:
- Work experience: Do you have more work experience than anyone else on the team, or unique previous positions that bring a creative and innovative edge? Remind the hiring manager of how your background can help the company achieve strategic goals.
- Knowledge: A company might offer you a signing bonus if you have specialized knowledge, so make sure they know what skills are your strongest. You could be the key to greater market share or increased revenue, and they should acknowledge that worth.
- Accomplishments: Have you won awards for your work or been a part of a project that received accolades in your field? Having you on board can bring prestige to your new employer, which adds more weight to your position.
2. Think about logistics
In addition to the fact that your experience, knowledge, and accomplishments could earn you a larger bonus, you may also want to cite potential logistics issues you’d face if you accept the job offer.
You may have a longer commute at this company than you would at a different one, and the time and money you’d spend should be part of the financial incentive. You might even need to relocate for the job, and if that’s the case, a relocation bonus, or reimbursement, should be part of the offer.
If you’re choosing between two jobs, this is your opportunity to ask for a better offer. Point out that you might leave behind a better benefits package or salary if you accept this position. Even if a company can’t give you higher benefits and compensation, they can ease the transition with a significant signing bonus.
3. Know your floor
Before you enter negotiations with a potential employer, you should already know how low you’re willing to go in terms of your bonus offer. You don’t need to reveal your best and final offer right away, but it’s important that you don’t allow the employer to blow past it. Assert yourself as someone who can stand their ground while staying reasonable.
Be confident, and remember that you’re worth every penny you’re asking for. Push back on lowball offers, especially if you know the company has the capital to pay you more, while remaining calm and collected. If you’re at the negotiating stage, chances are you’re interested in the job, so stay respectful and make a good first impression.
4. Understand constraints
Although you have financial needs and goals of your own, you have to walk into sign-on bonus negotiations with at least cursory knowledge of the company’s budgetary constraints. This is especially important if you’re dealing with a smaller company or a startup that may not have ready access to large amounts of capital.
5. Understand the effects
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 your potential employer know what’s at stake.
In addition to knowing the terms of the bonus, you’ll also need to take time to understand how the company will compensate you in the long run. Do you become eligible for raises after a certain time period? If your salary isn’t competitive right now, does the company have plans to increase it over time? If so, this may justify a smaller sign-on bonus and give you greater peace of mind when you reach your first day on the job.
6. Consider salary negotiation
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.
And if you can’t negotiate the bonus or the salary, you could still ask about extra benefits in your compensation plan like paid vacation time, education reimbursements, or remote days. In some cases, these concessions can provide the value you’re looking for in the form of indirect compensation — something the employer may be much more open to.
Negotiate today for job satisfaction tomorrow
With so many jobs offering sign-on bonuses, asking for or negotiating one doesn’t have to be daunting. It’s an indication that your potential employer already knows what you bring to the table — and that’s a good thing.
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. And in the end, your satisfaction will make you a better employee.
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