How to Negotiate a Sign On Bonus [6 Steps]

Money

Sep 22

Negotiating salary, let alone a signing bonus is intimidating for most of us. In fact, less than half of us negotiate anything out of fear of losing a job offer altogether. In this article, I’ll discuss how businesses use signing bonuses to attract and close key talent, but you’re probably reading this because you want to know how to get one. And if that’s why you’re here, you’re in luck, because I’ll include a step-by-step process on how to discover if one could be available and then how to convince a company to include one, if possible.

What is a Signing Bonus

A signing bonus is a bonus, typically cash, that a company offers to a new employee as an incentive to sign the offer letter or employment contract and join the team. Most organizations pay them on your first day or with your first paycheck. Signing bonuses are used widely in North American business culture and occasionally in Europe and other locations. But just because signing bonuses are widely used doesn’t mean you’re going to get one.

Average Signing Bonus

Signing bonuses range from a few hundred dollars to hundreds of thousands, and average amounts vary widely by industry, location, and competitive landscape. In my 30 years in corporate recruiting, negotiating, or overseeing more than 75,000 offers, mid-career professionals can typically land a signing bonus of $5,000 to $15,000. This number leaps up for senior-level technologists, proven sales professionals, and senior leaders, going to $100,000 or more.

Pros and Cons of a Signing Bonus

There are obvious advantages of having cash handed to you when you walk through the door (or soon afterward). But here are a few drawbacks to consider:

Taxes Take a Big Bite

Signing bonuses are taxed at the bonus rate. Expect about 40% of your bonus to evaporate when the tax man takes his bite. Consider asking for the employer to cover these taxes for you (this is called “grossing up”) so the amount you’re negotiating for is actually net of tax.

Repayment Agreements

It’s typical for a company to ask for a repayment agreement if you receive a signing bonus. Basically, if you leave the company within a span of time, you must repay the bonus.

Not On-Going

Unlike salary, signing bonuses are a one-time payment that does not recur. For this reason, you should not substitute a signing bonus for salary on a dollar-for-dollar swap.

Why Do Companies Offer Sign-On Bonuses

Companies offer signing bonuses for a variety of reasons, but the main drivers are:

Hot competition in your industry for valuable top talent
An offer from another company that threatens to take you away from them.
You’re leaving something behind at your current employer (unvested stock or earned-but- unpaid bonuses).
The value you are bringing to the new employer. For example, your reputation lands them more deals, your client relationships open doors, or your track record of generating huge value adds to their bottom line.
Overcoming an obstacle to your acceptance. For example, they are capped on the salary because of how they are paying other team members. You are unwilling to accept the lower salary, but they offer to close this gap with a signing bonus.

Some companies will advertise signing bonuses to generate buzz in the employment market. Healthcare, for example, often advertises signing bonuses in times of talent shortage. But since you don’t have to negotiate something that is offered before you apply, let’s go on to the more common approach.

Most companies won’t include a signing bonus unless they believe they won’t be able to land you without it. There’s an obstacle to getting a “yes” from you, and they really want you to say yes. For example, if Mary quits her current job at A-co, and joins B-co, she forfeits her $22,000 in unvested stock, she won’t be paid her $18,000 annual cash bonus (due in 3 months), and she must repay $5,000 in tuition reimbursement.

So, Mary should bring this up. If she says yes to the offer, it will actually cost her about $45,000 unless B-co makes her whole.

6 Steps to Negotiate a Sign-On Bonus

Here’s a step-by-step process to discover if a signing bonus could be added to your offer.

Get an offer, but don’t say yes immediately.
Analyze the offer for gaps. Where is the offer falling short, and by how much?
Are they asking you to do something like start sooner than you’d like, relocate your family?
Do they stand to lose something if you don’t accept? For example, they need you to be there for an important product launch, and it will cost (lots of money) if you’re not there.
Present your concerns to the company, and why you are struggling to accept the offer.
Ask them tactfully if they can close the gap for you with a signing bonus.

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How to Bargain Salary During a Signing Bonus Negotiation

Often, signing bonuses are offered to cover a lower-than-expected salary. Since salary is ongoing and signing bonuses are a one-time payment, it’s a mistake to accept a dollar-for-dollar swap. If you are giving up $1 in salary, you should ask for $2 to $3 in signing bonus in return. Be careful not to rob yourself here, because salary also flows through to bonus calculations, future raises, and even retirement matching.

If you are leaving a lot on the table, and the company balks at the money needed to buy you out of unvested stock, you could offer an increase in salary as an option.

When to Negotiate a Hiring Bonus

You can begin discussing a signing bonus from the very first conversation with an employer. If you’re talking money early on, and they seem reluctant to move you forward to interviews, you could suggest a signing bonus as a possible gap-closer, and signal you’d be open to this if there is a strong mutual fit.

But the best time to negotiate for a signing bonus is after they offer you the role but before you say yes. This is a big leverage point, and if you handle it correctly, you can safely explore if a signing bonus could be included.

Common Industries With Sign-On Bonuses

Almost every industry will include a sign-on bonus if the business conditions are right. Likewise, if the business conditions are wrong, the signing bonuses that are typical will dry up fast.

Financial services, for example, will offer aggressive signing bonuses because customer-facing hires directly drive revenue growth. But if there are massive layoffs in the industry and the competition for top talent has softened, there is no need to pay a premium to land the talent.

Wherever you find a “talent war,” you’ll also find signing bonuses. And they get larger and larger if performance incentives or stock are part of the regular compensation package in that industry.

Healthcare, financial services, sales, niche manufacturing, and technology are all extremely competitive spaces (when hot).

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What Industries Offer the Highest Signing Bonuses

Any industry where a book of business leads to massive results can yield a huge signing bonus. Think of sales-heavy industries where customer relationships are key and a non-compete agreement is not used or is invalid. Government contracting, B2B sales industries, financial services, and law firms.

Industries where stock is a big part of the compensation and retention package also must offer huge signing bonuses to hire talent in a growth spurt or from key competitors. Let’s face it, if you had $800,000 in unvested stock, you wouldn’t leave unless someone could offer you their own stock or cash. Software and tech companies (from startups to the giants) use “ownership stakes” liberally.

Lastly, industries where a sudden change in the market yields a huge profit opportunity for all companies in a sector will spark a talent war. If the price of copper suddenly spikes, for example, every copper miner in the world is going to be competing for a small pool of talent. This can drive signing bonuses through the roof.

How to Negotiate a Sign-On Bonus Conclusion

Sign-on bonuses are usually paid out on your first day of work or with your first paycheck.
The average signing bonus for mid-career professionals is between $5,000 and $15,000 and senior leaders could earn up to $100,000 or more.
Be aware of some of the disadvantages such as increased taxes, repayment agreements, and the nature of a one-time payment.
Companies don’t always offer hiring bonuses. They typically follow heavy competition in industries for talent or when a desired candidate is leaving behind large sums of money in bonuses or stock options at their former employer.
If you’re leaving behind unvested stock or a cash bonus when you leave your current employer for a new one, be sure to mention this during the hiring process.
The best time to negotiate a signing bonus is after you have received a job offer.
Remember that for every dollar you give up in salary, you should ask for $2 to $3 in signing bonus in return because they are not equal.
Enroll in the Salary Coach Academy to learn how to negotiate your pay with a low-risk, low-confrontation approach.

Contributor: John Gates

John Gates is the Founder of Salary Coach and a former Head of Global Recruitment for multiple Fortune 500 Companies. John has a combined 30+ years of corporate recruiting experience and has negotiated over 75,000 salary packages during his time. John teaches the Salary Coach Academy on Optim Careers, a complete educational program on how to negotiate salary using a low-risk, high-reward technique.

Editor: Cole Sperry

Cole Sperry has been a recruiter and resume writer since 2015, working with tens of thousands of job seekers, and hundreds of employers. Today Cole runs a boutique advisory firm consulting with dozens of recruiting firms, oversees Optim’s Resume Revision Service, and is the Managing Editor at OptimCareers.com.