What Is a Signing-on Bonus? With Steps To Negotiate One

By Indeed Editorial Team

Updated 30 September 2022

Published 15 November 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

When seeking a new position, the hiring manager may present a sign-on bonus that persuades you to choose to work at their company. You can receive a temporary boost to your financial status and negotiate a payment that coincides with your professional background. Consider learning about the significance of a sign-on bonus to help you determine which job offer and compensation plan to accept. In this article, we discuss what is a signing-on bonus, provide the reasons for offering bonuses to job candidates and explain the steps to bargain extra funds during the interview phase.

Related: What Is Compensation: Types and Examples of Benefits

What is a signing-on bonus?

A signing-on bonus is a financial incentive that an employer offers once it extends a job offer. It's a one-time payment, which means it's not included in your overall compensation plan, and each company may have different policies for obtaining the bonus. For example, one regulation may state that you're only eligible to receive the money after you've completed the first three or six months of your tenure. Another standard may require you to return the funds if you resign from the organisation before your probationary period ends.

Before accepting an offer, it may be helpful to assess the benefits of a signing-on bonus. You can determine if it's worthwhile to accept it or you may also consider requesting an increase to the amount the hiring manager proposes to align with the other items of the offer letter, such as the salary and benefits package.

Related: What Is the Army Sign-on Bonus (With FAQs)

Why do companies offer signing-on bonuses?

There are many reasons why a company may offer you a signing-on bonus. Here are some reasons hiring managers and leaders use these incentives:

Encourages professionals to work at the company

If a candidate is entertaining multiple job offers, then the prospective employer may provide the sign-on bonus to enhance its proposal, which may encourage the professional to choose the company over competitors. Hiring managers often present bonuses if the candidate has a specialised skill set that has a high demand. For example, a doctor is one of the few physicians in the country to perform fetal surgery and several hospitals have expressed interest in hiring a doctor. One facility offers a substantial signing-on bonus, an extra benefit that its counterparts didn't present, and the doctor signs the employment contract.

Related: Types of Bonuses: Definition and How To Get One

Enhances salary negotiations

During the interview phase, the hiring manager and candidate may negotiate a salary that reflects the professional's skill set and work experience and matches what the organisation can afford to pay. Employers may not commit to higher salaries for certain professionals because they often establish standard pay ranges based on the job title. For example, all retail cashiers may earn $10 per hour, while all managers earn $15 per hour, guaranteeing equity within the department store. To compromise, employers may initiate a sign-on bonus. The candidate can still receive extra funds, and the organisation can maintain its regulations for compensation.

Replaces benefits packages

A signing bonus can also compensate for the absence of employee benefits, such as health insurance, childcare and paid time off. It can occur when a professional who's an expert in their field pursues a new employment opportunity. The potential employer may not provide the same benefits packages as the previous company, so the sign-on bonus takes the place of those advantages. It incentivises the candidate to still accept the offer.

Read more: What Are Employee Benefits and 17 Types of Employee Benefits

How to negotiate a signing-on bonus

During the closing phase for your next potential job, follow these steps to negotiate a signing bonus that satisfies your financial interests:

1. Know your worth

The first step is to contemplate how your work experience and skills can make you an asset to the position you're seeking. You can use your worth as a professional to convince the prospective employer to modify a job offer in ways that make you more comfortable. Your justification can encourage them to add a sign-on bonus.

Conduct research to gain an understanding of the value of your expertise on the job market. You can look for salary prospects and benefits packages that match your professional background and compare your findings to the job offer you received. If you discover that your value is in demand and several companies may be interested in hiring you, then you can harness your knowledge to negotiate a sign-on bonus.

Related: How To Negotiate a Salary (With Examples)

2. Justify the additional funds

The second step is to justify the addition of the sign-on bonus to the employer. Tailor your persuasive messages to the hiring manager's interests and the goals of the organisation. You can recall the purpose of the employer recruiting new talent and position your onboarding as a way to fulfil that purpose. The extra funds can represent a condition for the company to receive the help it may need.

Besides your qualifications for the job, you can use other reasons to validate your request for a sign-on bonus. For example, perhaps you're inquiring about financial assistance to purchase the equipment to fulfil the responsibilities of the job. Use logical reasoning to show the interviewer that the bonus is necessary for you to agree to the job proposal and begin the onboarding process.

3. Predict your financial future

The third step is to decide if the sign-on bonus is substantial enough for you to reach your long-term financial goals. Remember that it's not a recurring payment, which means you can only depend on your salary to continue to receive compensation for the work you produce. Think about the biweekly or monthly earnings you can make with the salary on the job offer letter and review the list of benefits you can receive in exchange for full-time employment. If you've compromised on your salary and benefits packages, then ponder the offering of the sign-on bonus to determine if it's worth the compromise.

For example, if the extra money provided can enable you to purchase necessary supplies for a job, then you may feel satisfied with the proposal and move to accept it. The bonus may fall short of the financial freedom you envisioned before the negotiation took place. In that case, think about what the company can do to meet your interests and adjust your request accordingly.

Related: What Are Long-Term Goals? (With Types, Examples and Tips)

4. Reopen negotiations

If the hiring manager denies your request for a sign-on bonus, then the fourth step is to reopen negotiations to achieve the financial longevity you desire. Consider discussing an increase to your compensation plan or an expansion of your benefits packages. You can emphasise your credentials, such as your advanced education or specialised abilities, and demand on the job market to convince the company to change the employment arrangement. You can also ask for half of the original amount initially requested for a sign-on bonus that may still incentivise you to become a team member at the organisation.

Related: How To Negotiate Salary in an Email (With Samples)

5. Fully understand the terms

Once you and the employer have formed an agreement on the sign-on bonus, the fifth step is to ask questions about how the company administers the additional monetary resources. Make sure you understand when you can receive the payment and the impact of the rules on your financial goals. For example, if the employer requires you to work for the company for 90 days before the release of the extra funds, then you can review your personal finances and anticipate the day you can gain access to the bonus.

It may be beneficial to ask a lawyer to review the employer's terms before you attach your signature to the job contract. Clarify the circumstances that may require you to repay the bonus. You can also inquire if you can receive the total bonus at once, or the company splits the amount until after you've fulfilled your role for a specific period.

Related: What Is a Year-End Bonus? With Frequently Asked Questions

6. Consider your starting salary

Your starting salary is the amount of money you can earn when you first begin working for the employer. Consider if your earning potential can increase the longer you stay employed with the organisation. The presence of growth opportunities can influence your request for a sign-on bonus. For example, if you discover that you can boost your salary within a year of your contract, then you may agree to a smaller sign-on bonus in exchange for higher recurring compensation in the future.

Related: What Is a Spot Bonus and What Are the Advantages of It?

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