Some companies give signing bonuses when new hires accept their job offers. This bonus is a financial incentive to work for the company. Some companies pay signing bonuses immediately, while others pay them out over time or after a certain period. In this article, we will discuss when are sign-on bonuses paid out and the reasons employers offer them.
What is a signing bonus?
A signing bonus is an amount of money a company gives an employee who has accepted their job offer. Companies offer signing bonuses to attract well-qualified employees and convince them to accept a job. The bonus is in addition to the employee's salary, benefits and other bonus or commission opportunities. Signing bonuses can be:
- A single payment
- Multiple payments over a period of time
- Stock options
Signing bonuses can be any amount from $1,000 to more than $50,000 depending on the type of position. When an employee accepts a job with a signing bonus, they typically sign an agreement explaining the amount of the bonus and when and how it gets paid. Signing bonuses are common in the financial, sports and entertainment industries hoping to attract the best talent right out of college. However, any company can offer one.
Reasons employers offer signing bonuses
Employers offer signing bonuses to entice employees with certain skills or qualifications to work for them. These reasons include:
Making a salary more attractive
Companies that can't afford to meet a qualified candidate's salary requirements might supplement their job offer with a signing bonus. Giving a prospective employee a one-time bonus payout can encourage them to accept the job even though it pays less than they want. That individual might value receiving a large amount of money upfront if they are paying off a loan or need to make a big purchase. The company benefits because they stay within their salary budget and only have to pay the bonus once.
Offsetting lost benefits or income
If a prospective employee risks losing an existing or expected bonus, paid time off or other benefits by leaving their current job, the hiring company might offer a signing bonus to compensate for those losses.
Paying for relocation
Companies might recruit outside their city, state or region to find job candidates with the skills and experience they need. Candidates who live elsewhere, however, might be less likely to accept a job that requires them to move. Relocating is a big decision that can involve buying and selling a home, moving expenses and starting over in a new city. In this scenario, the company might offer a signing bonus that covers the employee's cost of relocation to encourage them to accept the job.
Related: Your Guide To Relocating for a Job
Competing for top talent
The most talented prospects in an industry usually receive multiple job offers. If a company suspects a candidate is in high demand or an individual has communicated that they have other job offers, a company might provide a generous signing bonus to get the candidate to accept their job offer over others. This is particularly common when hiring recent college graduates who show a lot of promise. Many companies want to attract the most talented young professionals into their organizations at the entry-level and invest in their future.
Filling specialized positions
Some industries have a small population of qualified applicants to fill open jobs. Positions that require hard-to-find or specialized skills include those in:
- Software development
- Medical specialties
- Information security
Companies in these industries and others are often competing with many companies for the same candidates. Or, the ideal candidate might already be employed and not currently looking for a new job. In these scenarios, companies offer signing bonuses in order o stand out from other job offers or to recruit a prospective employee away from their current job.
Executives and high-level managers who are good at what they do typically already have stable jobs. Companies looking to fill executive positions generally have to recruit candidates from other companies. They offer signing bonuses to entice these professionals to join their organizations. Many executives expect signing bonuses because of their high skill levels and years of experience. Signing bonuses show them a company is willing to invest in their talent.
When companies pay signing bonuses
Companies pay signing bonuses in part or in full after the prospective employee completes the hiring process, passes a background check and starts their new job. Businesses most commonly pay signing bonuses:
- After the employee accepts the job offer and signs the formal acceptance paperwork
- With the employee's first paycheck
- After the employee has worked at the company for a certain amount of time, usually a couple of months
- In increments up to several years, if the amount of money is significant
Some signing bonuses come with requirements the company should explain in your job acceptance or bonus paperwork. These might include:
- If you want to keep your signing bonus, you must work for the company for a minimum amount of time, such as two or five years. If you leave before that time, you might have to pay back your bonus or have it subtracted from your last paycheck, minus taxes.
- Achieving agreed-upon goals or milestones within a certain period to receive the entire signing bonus.
- Delayed payment of your signing bonus until you have worked at the company for a given amount of time. This is common in sports contracts, where a player must stay with a team for a minimum number of years to receive their entire bonus, and the bonus payouts are spread over time.
Companies typically offer signing bonuses and determine how and when they pay them out on an individual basis. The details surrounding your signing bonus are usually private, and you might have to sign a confidentiality agreement to keep that information between you and the hiring manager. If a company has not made it clear when are sign-on bonuses paid out, ask their human resources representative.