What Is a Sign-on Bonus?

Sign-on Bonus Explained

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Are you an in-demand candidate applying for jobs in a hot market? If so, you may be able to command a sign-on bonus in addition to pay and benefits.

Sign-on bonuses are intended to convince competitive applicants to accept job offers and stay with the company for at least the time required to earn the extra pay. These incentives have grown more popular over time. In fact, the number of job listings mentioning sign-on bonuses has doubled in the past few years. A WorldatWork survey showed that 38% of organizations are offering some kind of bonus to their employees, and sign-on bonuses are the most prevalent at 79% of all types offered.

You don’t need to be a software engineer or a finance guru to get one of these incentives. Research shows that bonuses have increased most sharply for occupations that don’t require a college degree.

If you want to secure a sign-on bonus with your next job offer, here’s what you need to know.

What Is a Sign-on Bonus?

A sign-on bonus is a lump-sum payment given to a new hire after they sign an employment contract. Employers give sign-on bonuses to attract staff for hard-to-fill job openings, especially during tight job markets or skills shortages.

  • Alternate names: hiring bonus, signing bonus, starting bonus

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.

How Sign-on Bonuses Work

Typically, a sign-on bonus is paid after a candidate accepts a job offer. This incentive can be structured in different ways, including as a one-time payment, several payments over time, or stock options.

Employers may also place conditions on sign-on bonuses. It’s not uncommon for bonuses to come with tenure requirements. 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.

Before you accept a job offer, read the fine print so you’re aware of the terms of the bonus and what you need to do to earn it.

How Much You Can Expect To Get Paid

Signing-bonus amounts vary widely based on the job, the demand for workers, and the industry. Employers might offer a flat amount or calculate the bonus as a percent of annual salary. Total amounts can range from $150 to $100,000.

Keep in mind that any amount you receive will be taxed. Bonuses are considered “supplemental wages” by the IRS and are subject to a higher withholding rate.

To determine what’s reasonable for your industry, take a look at free salary calculators online. Most will offer typical bonus amounts as well as salary and benefits information.

Sign-on Bonuses vs. Retention Bonuses

Sign-on bonuses are given to new employees who have accepted job offers, while retention bonuses (also known as stay bonuses) are provided to employees who stay at their jobs for a predetermined length of time. A job offer could include both a signing bonus and a retention bonus. For example, a company could offer a $1,000 sign-on bonus along with a $1,000 retention bonus if the employee stays with the organization for a year.

Companies Offering Sign-on Bonuses

More companies are offering sign-on bonuses than ever before. Although the job market is always evolving and incentives change quickly, these are some of the employers who, as of February 2022, are offering cash incentives to new employees:

  • Amazon: $3,000
  • Assured Home Health: $5,000
  • Bobcat Company: $3,000
  • CarMax: $10,000
  • Honda Development and Manufacturing: $5,000
  • Marriott International: $500
  • United Airlines: $10,000
  • Walgreens: $1,250

An easy way to look for companies offering hiring bonuses is to search job sites using terms such as “sign-on bonus” and “signing bonus.”

When You Can Negotiate a Signing Bonus

During a tight job market, many employers will offer a signing bonus upfront; but even if they don’t volunteer an incentive, you can negotiate a bonus as part of your compensation package.

However, it may be better to ask for higher base pay instead, as future raises will be based on this amount. You might even use a sign-on bonus as a way to negotiate a higher salary, offering to take a smaller bonus in return for higher base pay.

Regardless of which approach you take, keep these salary negotiation tips in mind:

  • Know the market: Do your research ahead of time using free salary calculators that take your skills, industry requirements, and location into account.
  • Take some time to consider: Although you don’t want to let an offer wither on the vine, it’s perfectly acceptable to ask for some time to think about it.
  • Be gracious: Whether you accept or decline, it’s worth it to be polite and say thank you. Most industries are small worlds. You never know when you will cross paths with someone in your field again.

Key Takeaways

  • A sign-on bonus is a lump-sum payment given to a new hire when they take a job.
  • A sign-on bonus may come in the form of a single payment, multiple payments over time, or stock options.
  • Bonuses are taxable at a higher rate than ordinary pay, so keep this in mind when calculating your total compensation.
  • Bonuses are negotiable, especially in tight job markets and hot industries.

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