Sign On Bonus: How to Ask for a Signing Bonus (2023)

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What is a Signing Bonus

A sign on bonus is a sum of money paid to a new employee in addition to base pay that functions as an incentive to accept employment. A sign on bonus typically refers to a monetary incentive however some companies offer a sum of money and/or employee stock options.

Signing bonuses used to be primarily used to recruit white-collar positions. However, the pandemic heightened the use of signing bonuses as a way to attract new employees in a variety of industries.

Reasons Employers Offer a Sign On Bonus

There are several reasons employers offer a signing bonus. Employers offer signing bonuses to:

• Close a gap between the monetary value of the benefits and job perks the individual receives at their current job and what the company offers (i.e. the company is making a significant effort to recruit away or steal away an employee)
• Demonstrate to the individual that the company values a specialized skill they add to the company
• Entice a talented high performing individual to accept a position with the company
• Entice the individual to accept the offer despite the company having no or poor benefits, job perks, or other forms of financial incentive
• Find a way around the company’s standardized salary ranges and compensation practices to increase the individual’s earning potential
• Limit the amount of base pay paid to the employee (short-term and long-term) and offer a one-time incentive instead of a higher base pay overtime
• Offer a prospective employee that has a competing offer an incentive to accept employment with their company
  Retain a highly skilled top performer over a long period of time

What is a Typical Sign On Bonus

The size of a sign on bonus varies. The amount is typically based on the position, level or seniority, skillset, and experience.

It’s important to note that companies have different budgets and processes to issue signing bonuses. Some companies have very standardized processes which may limit a sign on bonus amount while other companies have no standardized processes. The lack of standardized processes to issue a sign on bonus can be helpful to get a larger bonus, when you negotiate it well, or it can be harmful if the employer is inexperienced and/or has biases that are influencing what they are willing to offer.

A typical sign on bonus for entry-level non salaried positions is $5,000.00 – $10,000.00. The typical signing bonus for salaried and executive roles is between 10-20% of the employee’s base pay but can be much higher depending on the industry and company. For example, an entry-level software engineer signing bonus at a large company can be upwards of 38%+ of the base pay.

According to a report industries that have recently increased their sign on bonuses include pharmacy, education, healthcare, trucking, and hospitality.

Typical signing bonus (by industry):

• Education, school districts are offering signing bonuses of $2,500.00 – $10,000.00
• Healthcare, signing bonuses range from $1,000.00 – $15,000.00 depending on the position
• Hospitality, signing bonuses start at $2,500.00 for front desk managers, guest services, and line cooks
• Pharmacy, Walgreens announced a sign on bonus of $30,000.00 – $75,000.00 which resulted in CVS and RiteAid to follow suit
• Software, signing bonuses can range from $5,000.00 to more than $40,000.00
• Trucking, signing bonuses can be as large as $15,000.00

What Are Sign On Bonuses (Types)

There are two types of sign on bonuses, guaranteed and discretionary.

Guaranteed Signing Bonus

A guaranteed sign on bonus is just what it sounds like, a signing bonus that is guaranteed by the employer. This type of sign on bonus is typically given to high-level executives as an incentive to join the company or to entry-level employees in industries competing for talent.

A guaranteed signing bonus can take the form of an incentive bonus for joining the company and/or a relocation bonus to help with moving expenses. It is our opinion that a sign on bonus should solely be an incentive bonus for skills to be contributed and that relocation expenses should be negotiated separately as a relocation stipend not as part of a sign on bonus. This is because your skills, talents, experience, and track record of success should be valued independently of moving costs that have nothing to do with what you will add to the company.

Discretionary Signing Bonus

A discretionary sign bonus is a signing bonus that is not guaranteed and awarded at the discretion of the hiring manager. This type of sign on bonus is framed as a reward to new hires that have the potential to be high performers at the company. The problem with discretionary sign bonuses is that they are at the “discretion” of the hiring manager. Discretionary sign bonuses are undefined which can result in the new hire receiving a significant meaningful sign on bonus, a below market rate sign on bonus, or no sign on bonus at all.

When is a signing bonus paid?

How a signing bonus is paid is determined by the company’s sign on bonus policy. Typical payouts include a lump-sum payment on the first day of employment or payout installments over the first 90-days of employment, six months of employment, or first year of employment.

Sign on Bonus Payout Triggered by Met Employment Conditions

A sign on bonus agreement may state that the employee is only eligible to receive the sign on bonus if they stay with the company for X amount of time. In this case, the payout of a signing bonus is triggered by meeting employment conditions. Once the employment conditions have been met the sign on bonus is paid.

Sign on Bonus Payout Triggered by Met Employment Conditions

A sign on bonus contract may state that the sign on bonus is triggered by the start of employment and paid out in one lump sum or equal installments over an agreed to time period. In this case, the employee may or may not have to meet additional employment conditions.

Are signing bonuses taxed?

Signing bonuses are taxed. If you receive your signing bonus in one lump sum you are required to pay taxes on it according to your tax bracket. If you’re unsure how much tax you need to pay on your signing bonus speak with a tax accountant.

If you receive your signing bonus in installments through your scheduled paychecks or direct deposits then the tax is typically already taken out and accounted for with all the other deductions.

To ensure you don’t overpay taxes or underpaid taxes check with your payroll department regarding what taxes are taken out of your signing bonus.

Can a company take back a bonus if you quit?

Yes, a company can take back a sign on bonus if you quit. If you quit your job and have been paid a sign on bonus but have not met the terms of the sign on bonus policy such as 90-days of employment, six months of employment, or one year of employment then the company can have you pay the sign on bonus back.

A company can only take back a bonus and require you to pay it back if you sign an Employee Offer Letter and/or sign on bonus contract that outlines that a sign on bonus must be repaid if X months of employment are not completed or Y terms were not met.

For example, if you sign an Employee Offer Letter in which you receive a $16,500.00 sign on bonus paid in equal installments over one year of employment that requires one year of employment at the company or it must be paid back and you quit after 10 months then you owe the company the portion of the sign on bonus you received.

Paying back sign on bonus (Employee to Employer)

If you accept a sign on bonus and do not meet the terms of your sign on bonus contract then the employer can take back the bonus and require you to pay back what was paid out. When you pay back the sign on bonus, how long you have to pay it back is typically outlined in the sign on bonus contract. If it is not outlined be sure to propose a fair time period to pay back the sign on bonus or the company may state that you need to pay back the signing bonus when you quit.

The amount you pay back to the employer is the net amount of the sign on bonus. This amount is the amount you received after taxes.

Paying back sign on bonus (Employer to Employee)

If you are hired and your Employee Offer Letter states your employment includes a discretionary sign on bonus and you are fired or laid off the employer may have to pay you a signing bonus. This is because the signing bonus, regardless of it being discretionary, was a form of compensation promised to you upon employment. If you are fired or laid off and the employer does not pay you a discretionary sign on bonus you may have a case for unpaid wages.

Your future pay at a company is based on your current base pay. When you accept a monetary sign on bonus instead of higher base pay you could leave money on the table overtime. It’s important to consider how long you plan to stay at a company and do the math to determine if a higher sign on bonus will result in lower income long-term.

Sign on bonus pros:

• Signing bonuses are a way to increase your take-home pay.
• Signing bonuses can be structured in different ways, such as a large lump-sum incentive bonus for joining the company giving you money to buy a new car, payoff loans, take a vacation, etc.
• Signing bonuses can be a great way to start a savings plan and/or to contribute to a retirement plan/401k (which may be matched by your employer).
• Signing bonuses can be negotiated to increase your base pay and thus can increase your long-term earning potential.
  Signing bonuses can make up for benefits and job perks lost when leaving a current job.
• Signing bonuses can help make up a gap in benefits and job perks offered by a competing company.
• Signing bonuses show that the company is willing to invest in you and wants to retain you long-term.
• Signing bonuses that you do not have to pay back can provide some security in case you lose your job soon after starting work.

Sign on bonus cons:

• Taking a larger signing bonus in lieu of higher base pay negatively impacts your long-term earnings at a company as annual pay raises are determined off of base pay.
• Receiving a signing bonus may create expectations that you will perform at a higher level than other employees.
• Signing bonuses may be paid out in a lump sum, which can be difficult to manage if you’re not used to handling a large amount of money at once.
• Signing bonuses are taxable, resulting in additional tax responsibilities you need to pay based on how the signing bonus is paid to you.
• Signing bonuses are typically contingent on employment at a company for a set time period if you leave your job before the agreed to period of time the sign on bonus may need to be repaid.
• Signing bonuses may be used as a way to entice new employees to join a company during periods of high turnover, in which case you’re unknowingly joining a company that appears stable but is not.
• Signing bonuses may be unstructured and discretionary resulting in you not receiving as much as you thought and/or not receiving a signing bonus as soon as you thought.
• Signing bonuses may be pro-rated over the term of an employment contract and only be triggered when certain conditions are met.
• Your employer may expect you to work longer hours or more because you received a signing bonus.
• You may have to forfeit your signing bonus if you leave the company within a certain period of time.

The worst thing that can happen when you professionally and politely ask for a signing bonus is that the employer says they don’t offer signing bonuses or says “No.” Don’t leave money on the table, increase your job offer and maximize your pay by asking for a sign on bonus.

This statement:

• Expresses excitement and gratitude for the job offer
• States that you are aware of what other companies are offering thus indirectly informing the employer that you are informed and have done research
• Directly asks if the company offers sign on bonuses without being entitled or demanding

• Expresses excitement and gratitude for the job offer
• States you have a competing offer from a similar company that includes a sign on bonus
• Intentionally does not state the value of a sign on bonus offer you have received in order to prevent setting an anchor
• States you have performed market research regarding what total reward packages for the position include
• Directly asks if the company offers sign on bonuses without being entitled or demanding

How to Ask for a Signing Bonus (Questions to ask the employer)

If the employer says they are open to including a signing bonus they will likely ask you…“What signing bonus did you have in mind?”

Do not directly answer this question with a dollar value or percentage. Answering this question with a dollar value or percentage sets an anchor which the employer is likely to use to offer a little more to make it feel like you’re “winning” and getting a good sign on bonus.

Rather than directly answer the question it’s best to use the question to gain information from the employer by asking questions such as:

• What is the sign on bonus range for the position?
• What is the formula used to determine the sign on bonus?
• What is the company’s sign on bonus policy?

You can do this by saying something like…

This statement:

• Turns the employer’s question back around to them giving you an opportunity to can gather information
• Informs the employer that you are looking for a sign on bonus that is fair based on the market and what others receive
• Positions you to negotiate a competitive and equitable sign on bonus

Not every ask for a signing bonus will be in-person. In case you ask your employer for a signing bonus over email below are a couple of suggested email templates to support the process.

This email to ask for a sign on bonus:

• Has a personalized subject line that visibly stands out and makes it clear what the email is about
• Is brief and written in an easy to skim format
• Expresses gratitude
• Is direct and to the point without being demanding and entitled

This email to ask for a sign on bonus:

• Has a personalized subject line that visibly stands out and makes it clear what the email is about
• Expresses gratitude
• Is direct and to the point without being demanding and entitled
• States you have a competing job offer that includes a sign on bonus without sharing the value of the job offer or the sign on bonus
• States you have done market research and are informed regarding what total rewards variables companies are offering new employees
• Is brief and written in an easy to skim format

It is very important to note that these suggested scripts and email templates focus solely on asking for a sign on bonus. To truly maximize your short and long-term pay you want to also include your base pay, employee stock options, benefits and job perks, job title, and more into your ask.

Now that you know how to ask for a signing bonus let’s dive into the details of how to negotiate a signing bonus.

When negotiating a signing bonus you want to consider and account for the variables of a signing bonus that you can negotiate. Negotiable variables typically include amount, type, payout time frame, and frequency.

Ideally you want to include the negotiation of your signing bonus in a larger negotiation of your total rewards package. This ensures you maximize your outcomes by not piecemealing your negotiation (i.e. negotiating your job offer in fragments). However, on the rare occasion you may find that the only portion of your job offer that needs to be negotiated is your sign on bonus. In this case you can have a singular focus negotiation.

Negotiating Signing Bonus (Details)

Amount

You want to negotiate for a signing bonus amount that is competitive based on what the company has paid other new employees with similar skills, experience, education, training, and track record of success, as well as what companies in your industry, in your market, and at a similar stage are offering someone in the position. To help determine what amount you want to negotiate for, ask the employer the questions outlined above.

Type

When negotiating a signing bonus it’s better to negotiate for a guaranteed signing bonus over a discretionary signing bonus. A guaranteed signing bonus ensures you are clear on the signing bonus amount, when you will receive the signing bonus, and under what terms you receive the signing bonus. Discretionary signing bonuses are too vague and can occasionally take advantage of a new employee’s trust.

Payout time frame

How and when a signing bonus is paid will vary based on a company’s sign on bonus policy (or lack thereof). When negotiating you can negotiate that your sign on bonus be paid in:

• One lump sum at the onset of employment
• Equal installments over a set time period (e.g. 90-days, six months, quarterly over 12-months, monthly over 12-months)
• Installments in which a large amount of money is paid upfront and the remaining amount in installments overtime.

Frequency

An often overlooked sign on negotiation variable is the frequency of the sign on bonus. Frequency is often overlooked because “sign on bonus” denotes a one-time event. However, if a company is looking to invest in you and retain you overtime they may be open to renewing your sign on bonus annually.

It’s important to note that if you negotiate for the annual renewal of your sign on bonus it should only be for as long as you hold the same job duties.

If you are promoted and/or trusted with new job duties your sign on bonus (which may be referred to as an employee retention bonus when paid out the following year) should reflect the value of the job duties and responsibilities to the company and market. A promotion and/or new job duties are valid reasons to renegotiate the value of your annual sign on bonus.

How to Negotiate a Signing Bonus (Steps)

1. Perform research
2. Create a list of quantified achievements
3. Get leverage
4. Set a sign on bonus goal
5. Practice what you’ll say
6. Ask about the inclusion of a signing bonus in your offer
7. Negotiate the signing bonus
8. Determine if the signing bonus is equitable
9. Get all details in writing

Perform research

Research what the company and the company’s competitors are offering for signing bonuses. To learn the company’s sign on bonus practices ask the employer:

• What is the sign on bonus range for the position?
• What is the formula used to determine the sign on bonus?
• What is the company’s sign on bonus policy?

To easily, and accurately, search what the company states it is paying in sign on bonuses and what its competitors state they are paying you can use the following search query: [Company name] signing bonus for [Job title] in [City].

Create a list of quantified achievements

To present a data-driven persuasive case that maximizes the amount of a signing bonus you want to create a list of your quantified achievements as they relate to the job’s duties and responsibilities. Relate your achievements to the duties of the job to demonstrate the value you bring to the company. You can create a list of your quantified achievements using PayDestiny’s free Achievement Bank tool.

Get leverage

One of the best ways to increase the amount of your signing bonus and overall job offer is to have leverage via a competing job offer that includes a signing bonus. Leverage a competing offer to ask for and negotiate a sign on bonus. Note you should only use competing offers as leverage if you will actually take a competing offer if you do not get what you want.

Set a sign on bonus goal

Use your research on the company’s sign on bonus practices, your market research, and your personal performance achievement data to set a sign on bonus goal. Know exactly what you want to ask for. Outline your preferred sign on bonus agreement terms such as amount, type, payout time period, and frequency.

Practice what you’ll say

Come across confident and deserving of a sign on bonus by practicing what you will say to ask for the inclusion of a signing bonus in your offer. Practice what you’ll say to negotiate a signing bonus that hits the amount and terms you set as a goal. The more you practice the more confident you’ll become.

Ask about the inclusion of a signing bonus in your offer

Once you have prepared to ask for a signing bonus, use your preparation to professionally and politely ask the employer about the inclusion of a signing bonus in your job offer.

Negotiate the signing bonus

If the employer is open to including a signing bonus in your offer, guide them to make an offer. Once they make an offer use your research and personal performance achievement data to negotiate and increase the value of the sign on bonus.

Determine if the signing bonus is equitable

Once you reach a “final” signing bonus amount, determine if it is equitable by asking the employer questions to determine if the amount reflects what other people in the position with your skills, experience, education, training, and track record of success received.

Ask the employer the following question:

• Where does my signing bonus fall on the compa ratio for signing bonuses offered to people who hold the same job title?

This question is asking the employer to share how your signing bonus offer compares to the median signing bonus offered to others in the same position at the company.

The formula to determine if your sign on bonus is low, average, or high is:

• The dollar value of your sign on bonus/The company’s median sign on bonus dollar value for the position

If the company doesn’t typically offer signing bonuses you can use the market average signing bonus value for the position to understand if your sign on bonus is good or not. The formula for this is:

• The dollar value of your sign on bonus/The market’s median sign on bonus dollar value for the position

Using the formulas above you can determine if your sign on bonus is low, average, or high for the company and market. The compa ratio scale below outlines where your sign on bonus falls.

Sign on bonus compa scale (1 is the median sign on bonus value):

• 0.7 or lower is inequitable
• 0.8 – 0.9 is on the low end
• 0.91 – 1.10 is average
• 1.11 – 1.20 is on the high end
• 1.21 or above is very competitive

If you find that your sign on bonus is lower than anticipated or not equitable, continue your negotiation until you reach a value you are happy with.

Get all details in writing

Once you establish an agreed to sign on bonus and sign on bonus terms make sure to get every detail no matter how small written into your Employee Offer Letter. Having the details written into an offer letter that is signed by you and the employer ensures that the details will be upheld.

Now that you have the tools to ask for and negotiate a sign on bonus let’s build your confidence by demonstrating a sign on bonus example negotiation.