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Sign-On Bonus: Everything You Need to Know

Know "what is a sign-on bonus" with its pros and cons. Make informed decisions to enhance your career and maximize your gains. Jobs with sign-on bonus included.

By 

Synkdup Editorial Team   

|  8 February 2024

sign-on-bonus

Who doesn’t love bonuses? Getting extra rewards for meeting certain criteria on top of your salary sounds perfect. Nowadays, the number of bonuses available for grabs is just unbelievable. Bonuses are being offered for even the simplest of things. The latest trend is the sign-on bonus!

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What is a Sign On Bonus?

It is a financial benefit in addition to the salary offered by the recruiting company to an employee for joining them. It is typically offered to highly skilled employees with abilities that are low in supply but high in demand. The exact amounts offered in bonuses are variable and depend on numerous factors, like the size of the company, the importance of the role, etc.

Both employers and employees need to carefully consider several factors when offering or accepting them. Apart from a sign on bonus, other things should be looked at when deciding whether or not to accept a job.

How Do Sign On Bonuses Work?

Understanding the mechanisms behind them can take time and effort. They can be paid out in multiple ways, like upfront when they join, with the first month's salary, in installments attached to the salaries paid out for a few months, etc.

They are usually offered if a company feels the employee can offer more value over time than the signing bonus. It also reduces the chances of them joining a rival in their place. However, there are a few other things that need to be taken into account.

Sometimes companies may offer them but compensate for them by reducing other benefits for employees. It is not uncommon for companies to offer employees a signing bonus but give them a lower salary. Watch out for that!

How Much Are Sign On Bonuses?

The exact answer varies by company and industry, but typically it is around 10% of the individual’s first paycheck. It can go a bit higher or lower depending on the job titles and the magnitude of the role. But 10% can be taken as a general figure.

Signing Bonus Pros And Cons

It is also important to know both the disadvantages and advantages of signing bonuses before getting involved with them. Let us examine both below. This will help you understand whether or not they fit your needs.

Pros

There are many benefits that they carry for individuals who receive them.

1. Quick Cash: It provides an immediate boost to their finances, which can help with immediate expenses like relocating and settling down.

2. More Commitment From Recruiter: A firm is unlikely to offer them unless they want to work with the candidate. Such companies help one grow massively in their careers and help them rise.

3. Job Security: The fact that an employer shows interest in you generally means they want to work long-term with you. It does not make sense for them to offer a signing bonus and then fire you soon because they’ve invested more in you.

Cons

1. Complacency: Some recruits can become a bit complacent after receiving it. They may take their foot off the gas and not give their all at work, which will hinder their progress at work and can derail their career.

2. Difficulty Leaving: Many companies have clauses stating that signing bonuses are refundable if you leave the company without serving a minimum period. This can be a real problem when you hate your job and do not want to work there anymore.

3. Taxes: They are subject to higher tax rates compared to normal salaries. This can leave you with a lesser amount in hand.

Why Do Companies Offer Sign On Bonuses?

There is no definite answer to this, as there can be multiple reasons behind it. The pros and cons need to be weighed thoroughly before making use of such methods. Let's take a look at some of these reasons.

Compensate For Losses

They are usually offered to highly qualified individuals. These individuals may be reluctant to leave their current jobs as they are likely being paid well. Not to mention the instability faced when changing jobs. They can be good incentives for employees to jump ship!

Preventing Them From Joining A Rival

It can be a great way to motivate a worker to join you over a competitor. The last thing a company wants is to lose out on a good candidate and have them join their direct competitor.

It is even possible for companies to offer them to employees working at rival firms to convince them to ditch their current employers. This helps improve the competitive gap by both strengthening your organization and weakening a rival.

Motivating Them To Cross Borders

Sometimes a highly qualified and experienced professional may be working abroad but could be the perfect fit for a company. However, moving to a new city, let alone a new country altogether, can be a tough transition. Adapting to new cultures, office practices, a new environment, etc.

It may even seem daunting to many, and that’s where sign on bonuses can come in handy. They provide an incentive for employees to take this difficult step in their professional lives. Sometimes it may involve leaving their families behind too.

Some Industries That Offer Sign On Bonuses

An important thing to note is that not all industries offer jobs with sign on bonuses in the same proportions. So consider the industry you are working in as well. Here is a list of a few industries that offer sign on bonuses in certain roles:

  • Commercial Transport
  • Medical Industry
  • Marketing
  • Legal Industry
  • IT (Information Technology)
  • Childcare

Popular Jobs With Sign On Bonus

Now, as we go further into each industry, it is important to know that every job in them does not offer such incentives. Let us also consider which jobs in those industries offer signing bonuses to employees.

Warehouse Workers

It covers a broad range of roles that are involved in the successful functioning of a warehouse. Most of these roles are fast-paced and also require coordination with others. Some of these involve knowing how to operate certain machines, too. For example, forklift drivers may need training to know how to operate the machine.

Other important responsibilities include stocking and restocking shelves, keeping track of inventory, receiving orders, processing orders, and ensuring they are timely shipped, etc. Most of these jobs do not even require a degree.

Nurses

They must have good knowledge of medical procedures and be good communicators to understand patient’s needs and the doctor’s instructions. They must know how to operate certain medical devices and record and interpret certain medical data.

Drivers

These include most types of drivers involved in delivery services. Whether it be those carrying cargo to warehouses or those directly delivering goods to the customer’s doorsteps, the possibilities of a signing bonus are likely. The chances are even higher with big companies like Amazon, for instance.

Childcare

The trend of women working is increasing, and many women even continue working after having kids. This is where childcare comes into play. Those employed in this field must have good soft skills and be able to interact well and monitor the little ones. They must clean interactive areas, take care of the hygiene of the kids, and even change diapers if needed. They must even prepare snacks or meals for children and offer first-aid if needed, etc.

Teachers

This is a trend that appears to have caught momentum after COVID-19 with many schools struggling to find teachers to fill vacancies. Teaching is a great job that is highly respected by society.

To be a teacher, one must first have the necessary qualifications and be highly knowledgeable in their subjects. They must also have leadership skills and be good role models for their pupils. They must also be able to empathize with students.

Hospitality-Related Roles

It is considered part of the consumer services industry and is not a bad option for those with limited educational qualifications. It may require some on-the-job training, and candidates must also have good soft skills. Positions in hotels like front desk managers, line cooks, guest services, housekeeping, etc. are some common examples of jobs that offer them.

How To Negotiate A Sign On Bonus

Now that we know the technicalities of signing bonuses, let’s figure out how to put them into practice. Negotiating it can be a tricky task for both employees and recruiters. Let's consider various factors from both perspectives.

Take And Leave Employees

This is one of the biggest fears any recruiter has, employees who are merely in it for the bonus and then leave immediately after getting what they want. They must be weeded out during the hiring process to avoid issues later on down the road.

Below are some guidelines and recommendations to be followed for all recruiters:

  • Never pay it before all the onboarding paperwork is completed. The recipient may simply take the cash and disappear.
  • Have a clause inserted that makes signing bonuses paid upfront refundable to the company if a certain period is not served by the candidate. If not, candidates can join, receive the bonus, and leave the next day!
  • It is preferable to pay the hiring bonus in installments, as it puts less strain on the company’s finances and also keeps employees committed for longer.
Pro Tip: Pay out the hiring bonus in installments throughout the probationary period. For example, a hiring bonus of $600 should be paid out over 3 months of probation at a rate of $200 a month. This way, even if the newbie plans to ditch the company, he will have to serve a notice period at least. This offers the firm more security.

Provide Valid Arguments

From a candidate’s perspective, you must have a lot of valid reasons to support your demands for a signing bonus, as no company is going to unnecessarily go around splashing extra cash. If possible, provide facts from credible sources in the industry that are in favor of your requests. Numerical data can be especially useful.

Do your research and find out how prevalent signing bonuses are in your industry. Also, find out the industry average, minimum, and upper limits before figuring out which amount you should negotiate for.

Another thing to keep in mind is that your decision to join or not should be based solely on whether or not you are getting an adequate signing bonus (if any). Look at everything holistically; for example, a high signing bonus with a sub-par salary may not be so good long-term. Also look at other benefits like health insurance, etc.

Frequently Asked Questions

Q: Why are sign-on bonuses taxed at a different rate?

Ans: They are treated by the IRS as supplemental income and not fixed income. Hence, they are taxed differently compared to salaries. Usually, they are taxed at a flat rate of 22%. For example, a hiring bonus of $1,000 will have a deductible amount of $220, giving the employee $780 to take home.

Q: How to ask for a sign-on bonus when joining?

Ans: The most important thing is to do your homework and present concrete facts and numbers to support your argument. Also, if you are making a big transition, like leaving a good job or moving abroad, those can be used to convince recruiters. Also, show a willingness to commit long-term and not just be in it for a quick money grab.

Q: When do you get your sign-on bonus from a company?

Ans: There is no fixed answer, as it varies depending on the industry and company policy. It can be paid upfront or in installments. Don’t expect to get the it without having completed all the legal paperwork. Some companies pay it after a certain period has been completed.

Q: How are sign-on bonuses paid to employees?

Ans: They may be paid through cheques or direct deposits to bank accounts, as these are usually the safest methods of transaction. Also, they tend to be recorded and can be easy to use as proof in case of any contractual breach.

Q: Is there a sign-on bonus for joining the Air Force?

Ans: Yes, but they are not as common, and one may have to offer an enlistment commitment for a period of 4 to 6 years.

Q: What is a typical sign-on bonus?

Ans: There is no general benchmark that can be used when searching for an ideal figure. They are highly variable and depend on several factors.

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