When is a signing bonus paid?
Estimated Read Time: 4 minutes
Signing bonuses, also known as sign-on or hiring bonuses, have long been an attractive incentive for job seekers.
While not especially new, lately, our research has found that 6 in 10 employers are using them in order to entice in-demand talent.
So, what is a signing bonus? It’s a one-time sum offered early in an employee’s tenure at a new company. In the past, these have been the domain of top executives and senior leaders, but given todays’ skills shortage, they are no longer exclusively for upper management, but particularly pertinent for those with niche skills.
Perhaps this is due to the fact that, post-pandemic, we are experiencing a candidate-driven marketplace, where there are many jobs than candidates available.
This is putting pressure on fields that were already facing a skills gap—like tech specialists and finance experts—and means job offers need to be more enticing than ever to attract top talent.
Which leads us to the question: when is a signing bonus paid? Why offer one at all?
Why offer a signing bonus in 2022?
As far as incentives go, signing bonuses are powerful pulls for attractive, in-demand candidates.
They’re particularly useful when candidates are relocating internationally or interstate to help cover the initial, up-front moving costs.
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To stand out in a competitive marketplace
In situations where the candidate is a local, and in fields where the demand is especially high, signing bonuses are a great way to differentiate your offer from that of a competitor, especially if the candidate is considering multiple offers.
It’s important, however, to remember that employees are not just motivated by money. Though a sign-on bonus is a sweet way to win a recruit over, it’s also essential to build a positive company culture and work-life balance.
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To cover a candidate's financial losses
In some cases, it may make financial sense for the incoming employee to request a signing bonus in order to recoup financial losses from their former company. For example, if an employee signs on to join your company just before they expect their annual bonus from their former employer, being able to offer a signing bonus may just be the thing to win them over.
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To compensate for a lower salary
Another common reason for offering a signing bonus is to compensate for a lower salary. Some companies have policies that maintain salary equity, which means negotiating a higher base salary is impossible. In these cases, a signing bonus may be a way to make your offer more appealing, particularly if the candidate is intent on negotiating.
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To encourage loyalty
Signing bonuses can be used to aide retention through a contingency in the initial offer. The recipient may be required to pay back the bonus if they leave the company within a certain amount of time or the payment may be split up and awarded in increments - which works as a barrier to talent bouncing between roles for the next highest offer.
How much should a signing bonus be?
Typically, signing bonuses are around 10 percent or more of the employee’s annual salary, though some firms are prepared to offer up to 20 percent to secure an especially promising new recruit.
Signing bonuses may also be developed according to the candidate in order to cover the bonus they would have received if leaving a previous employer before this can be awarded, or a lump sum may be determined by the company to manage costs.
Related: Ready to make a job offer? Check out our top tips here
When is a signing bonus paid?
As a one-time sum, signing bonuses are always paid after the candidate has accepted the job offer and signed their contract.
When and how it is paid is usually open to negotiation between the company and the new employee.
Depending on the total amount of the bonus, companies may choose to pay it in a single lump sum once, or, if it’s significant, over time.
For some top executives, senior managers, on in-demand specialists, the amount may be so great that some companies choose to pay it over several years.
So, when planning for your next hire, consider a signing bonus in our candidate-driven market. It may be just the thing to win your next major talent.
