What Is a Sign-On Bonus? Definition and Negotiation Tips
By Jennifer Herrity
Updated August 31, 2022 | Published January 3, 2020
Updated August 31, 2022
Published January 3, 2020
Jennifer Herrity is a seasoned career services professional with 12+ years of experience in career coaching, recruiting and leadership roles with the purpose of helping others to find their best-fit jobs. She helps people navigate the job search process through one-on-one career coaching, webinars, workshops, articles and career advice videos on Indeed's YouTube channel.
When starting a new job, a sign-on bonus can help you start your role in an advantageous position. This bonus can be a great financial incentive to change your job. To help encourage you to join their team, your potential employer may offer you a sign-on, or starting, bonus during your interview. Otherwise, you can also suggest it during the salary negotiating process.
In this article, we’ll discuss sign-on bonuses and how you can negotiate for one during your interview.
Related: How Do Bonuses Work?
What is a sign-on bonus?
A sign-on bonus is a starting bonus that you might receive when starting a new career. It may come in the form of a single payment, multiple payments over time, or stock options.
Since it is a one-time payment, the bonus won’t affect your overall salary. During the interview process, it is important to understand whether a sign-on bonus will make financial sense for you in the long term or if it would be better for you to have a small sum for a sign-on bonus and then ask for an increase in your salary. If you plan on staying with the company for a while, lowering your starting bonus and increasing your salary makes much more sense.
Why companies offer a sign-on bonus
There are three main reasons employers may offer you a starting bonus.
You are more likely to be offered a starting bonus when you have sought-after skills. A bonus gives employers an advantage over their competitors. It is a way to get you to consider the position they are offering. If what you do is in demand by many companies, then you are more likely to get a sign-on bonus.
2. Compensation for the salary
This bonus is sometimes offered by employers as compensation. For instance, they might not be able to offer you the salary you want. Employers might need to maintain salary equity within the company, which might cause a lower salary than you had asked for.
3. Make up for benefits
If you are an expert in your field, you may leave behind a potential bonus or other benefits when going from one company to another. When this is the case, your prospective employer may offer you a sign-on bonus to make up for what you would be leaving behind.
Industries with sign-on bonuses
Some industries are more prone to offer starting bonuses because positions require in-demand skills and expertise. You might expect sign-on bonuses in these fields:
The more in-demand skills you have, the more likely you are to be offered a signing bonus.
Related: Job Cast: Negotiate Your Salary in 7 Steps
Getting paid what you’re worth starts with having the right information. In this webinar, you'll learn how to understand your earning potential and negotiate your pay.
How to negotiate a sign-on bonus
Negotiation is an important skill for every job seeker. You can negotiate a sign-on bonus just as you would for work conditions and salary. Here are the things to keep in mind when negotiating your sign-on bonus:
1. Know your worth
Gain a thorough understanding of how valuable your skills are for the company. Make sure what you do is in demand and that your prospective employer is showing real interest in you.
2. Make a case for yourself
Give concrete reasons you should be given this bonus. It could be that you will have more travel expenses for example. A good reason will make it easier for you to be given that bonus.
3. Look beyond the sum
Figure out if the sign-on bonus makes financial sense in the long term. Let’s say an employer offers you a substantial sum for a starting bonus. You might want to say yes, shake hands and get started on your new job. But once the sign-on bonus is paid out, ensure your salary will be suitable for your needs.
4. Reopen negotiations
If the answer to the point above is no, then this might be the time to reopen the negotiation on your salary. You can ask for half the amount of your sign-on bonus and increase your monthly salary. In doing so, you would give yourself better financial longevity, especially if you plan on staying with the company for more than a year.
5. Make sure you fully understand the terms
Understand what is being asked of you when you say yes to this sum of money. There could be certain parts in your job contract that you would prefer to discuss during the interview process before responding. Reading your job contract thoroughly and asking a lawyer to go through is a good way of knowing what you are agreeing to.
6. Consider your starting salary
Look at the salary figure you’ll be starting with. If you are not satisfied and your prospective new employer is refusing to go higher, then this is the time to propose a sign-on bonus.
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