If you’re in the final stages of interviewing for a new job or have accepted an offer and are working out the compensation details, it’s time to consider if and how to ask for a signing bonus.
Once the exclusive purview of professional athletes and highly paid executives, signing bonuses have become more common as employers vie for top talent and in-demand workers find themselves in the position of deciding between multiple job opportunities at one time. While most negotiable signing bonuses today are offered to skilled workers or those seeking professional jobs, today’s competitive job market has companies offering signing bonuses to teachers, grocery store workers, manufacturing assembly line workers, and truck drivers, to name just a few types of jobs now commanding bonuses.
Like everything related to a job search, though, there are conventions and best practices when it comes to asking for a signing bonus. This article will cover what you need to know before you ask for a signing bonus to help increase your chances of receiving what you want and deserve.
What is a signing bonus?
A signing bonus is a type of monetary incentive companies use to persuade prospective employees to join their organizations. Companies that offer signing bonuses are trying to sweeten the hiring deal. By providing this incentive — which is sometimes referred to as a sign-on bonus or starting bonus — the potential employer is hoping the additional compensation will make their offer of employment so attractive that any competing job offers will pale in comparison.
There are as many different types of signing bonuses as there are compensation plans. Typically, though, a signing bonus will fall into one of these categories:
It can be a lump-sum one-time payment after the new employee accepts the job.It can be paid out in increments over the course of the first year the employee works on the job.It can be a combination of these types where a large immediate lump-sum payment is followed by smaller additional payments for a specific period after work commences.It can come in the form of stock options.It can be a combination of cash and stock options paid out on a mutually agreed-upon schedule.
There are no hard and fast rules regarding how much a signing bonus should be. It just depends on industry norms and what you can negotiate.
Why do companies give signing bonuses?
Companies offer signing bonuses to potential new hires for a number of reasons, including:
Pilfer top executives and seasoned managers from other companies. Filling high-level management positions can be difficult. Most qualified candidates will be ensconced in other organizations. To entice them to jump their current ship and move to a new company, the business will make the compensation package as attractive as possible (that includes tacking on a sizable signing bonus). Compensate for having to offer a lower-than-expected base salary. Sometimes, companies can’t fulfill a prospective employee’s annual salary requirements. To make up for the shortfall, the company might offer a signing bonus hoping that a nice sum of money upfront will make up for not being able to offer a higher salary. Offset the loss of bonus, vacation pay, or some other perk. Often, when employees move from one company to another, they forfeit valuable benefits. A signing bonus can make up for this and remove what could have been a major obstacle. Cover relocation expenses. If the prospective employee faces an expensive move, offering a signing bonus to offset those expenses can tip the scales in the company’s favor. Compete for in-demand workers. Some industries — health care, software development, cybersecurity, and restaurant/hospitality, to name a few — have trouble finding workers to fill open positions. Companies offer signing bonuses in these understaffed work environments to be more competitive in attracting applicants. Compete for the best and the brightest. Some companies and firms use the promise of a signing bonus to court graduates of prestigious universities. Since the entry-level positions offered to many new grads may have starting salaries on the lower side, these firms add a sizable signing bonus to bolster a job offer.
How to ask for a signing bonus
Asking for a signing bonus isn’t something you should rush into. To succeed, do your research, settle on the amount you want, time your request just right, and draw on your negotiation skills to work through the details.
What to research first
Before you start trying to come up with a signing bonus amount, know the ins and outs of the company you’re negotiating with. What types of bonuses do they usually hand out and how often (e.g., quarterly, end of the year)? What does a typical benefits package look like? How are raises determined and how often are you eligible for a raise or promotion?
If you know someone who’s already inside the company, see if you can get them to provide some insight. If not, research similar companies and check around with your network for their thoughts. Recruiters are often a good resource for this type of insider information.
Then, look at what you’ve learned in light of your current offer. Is the salary the company offers comparable? Does your benefits package seem sound? This will help you determine what kind of leverage you might have when negotiating for a signing bonus.
Know the signing bonus amount you want
Reduce your insights and calculations to a single number: the amount you plan to request as a signing bonus. Be prepared to back this number up with evidence. For example, if you’re armed with industry intelligence that your salary offer is a few percentage points below the average, use that information to support your case for the signing bonus amount you’ve set your sights on.
When to ask for a signing bonus
It’s important that you don’t get ahead of yourself. You don’t want to broach the subject of a signing bonus prematurely and potentially sour any chance of a future negotiation.
Don’t even mention a signing bonus unless you have a firm job offer — complete with salary, benefits, and perhaps even a signing bonus! — in hand. If at all possible, don’t react to your employer’s offer with a counter right away. Instead, focus on the job duties and other aspects of the job first. Then, see if your hiring manager or the human resources (HR) person opens the door for a conversation. If they do, be prepared to respond to their thoughts. If they don’t, it’ll be up to you to start the negotiation.
Signing bonus negotiation tips
To get the conversation started, mention how much you’re looking forward to working with your new employer. Then, segue into the compensation package, making note of the offer details.
Now, it’s time to make your pitch for a signing bonus. Consider the background research you’ve done and make your best case for the bonus you’re seeking. Toward this end:
Link the amount you’re requesting (the what) to the reason you’re requesting it (the why). For example, if you’re relocating and are seeking help with expenses, show that you’ve done your due diligence in ascertaining what moving will cost. If you see the bonus as making an otherwise below-your-market-worth salary palatable, offer up the numbers to prove your point and consider this part of your salary negotiations.Think about your leverage. If you’ve had multiple offers and can afford to let this one go if your numbers aren’t met, you’re in a completely different negotiating position than if this job is your only offer. Before you start talking, know how far you’re willing to go to get what you want. How important is this extra money to you and what are you willing to give up to obtain it?Be prepared to address counteroffers. There’s more than one way to formulate a bonus. You can be paid upfront, in increments over a certain period of time, or on a work anniversary. If the company can’t pay you the full bonus you want, would you settle for more paid vacation days or some other form of compensation? Don’t be afraid to get creative.
Get the signing bonus amount in writing
Keep in mind that your signing bonus is part of your employment contract. Get it in writing. Make sure all the details are spelled out with respect to the amount, how it will be paid, whether taxes will be taken out, and what the terms for bonus retention are. Typically, an employee must stay with a company for a year or pay back the bonus if they depart before the agreed-upon time period.
Better your career and life
Embarking on a new career can be both challenging and exciting, especially if your journey begins with a nice-sized signing bonus. After you secure that bonus, check out our vast library of money-mastery resources. And if you’re ready to step up your money-making game, take a moment to check out the New York Times bestseller, “I Will Teach You to Be Rich.” You can download the first chapter below for free!
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