If you’re looking for a way to land that top candidate who may be weighing multiple job offers, consider sweetening your offer with a sign-on bonus.
In a recent Robert Half survey, 43% of large companies said they offer these upfront payments to get people on board, while 40% of companies overall offer sign-on bonuses. If you’re looking for the lowdown on this effective recruiting strategy, plus best practices for incorporating sign-on bonuses into your job offers, we’ve got you covered. Another great resource is the latest Salary Guide From Robert Half.
What’s a sign-on bonus?
A sign-on bonus is a financial incentive offered to a potential new hire. The amount varies widely by industry and job level but generally lies between 5% and 20% of the base salary. Smaller bonuses are usually paid in full right away, while larger bonuses may be handed out over time or come with strings attached (more on that below).
Why should you offer a sign-on bonus?
These are the most common reasons employers offer sign-on bonuses:
To recruit for hard-to-staff positions
Recent research from Robert Half shows that employers in many sectors struggle to hire talent — 90% of technology managers, for example, said it’s challenging to find skilled professionals. In such a competitive environment, a sign-on bonus could tip the scales in your favor.
To bridge the gap between your offer and candidate expectations
Perhaps during salary negotiations a candidate asks for a higher figure than you can afford or mentions that the benefits at their current employer are better. Consider making up the difference with a sign-on bonus to make your overall offer more appealing. An added advantage? As this is a one-off payment, you won’t incur the annual expense of a higher salary.
To show a candidate you recognize their value
Professionals want to be rewarded, but they also like to feel wanted. If you know that a candidate is in high demand and considering other offers, a sign-on bonus sends a powerful signal that you highly value them and are willing to go the extra mile to bring them on board.
4 tips for structuring sign-on bonuses
Although sign-on bonuses often differ in range and conditions, several general principles apply. Consider these options and best practices:
1. Build in contract terms
If a sign-on bonus is substantial, you may want to include conditions such as:
- Paying a portion upfront and the rest after a probationary period
- Paying in installments, with later payments due only if the employee remains for a set period, such as six months or a year
- Stipulating that the employee must repay all or part of the bonus if they leave before completing a defined period of active employment, such as two years
Bonuses with strings attached act as loyalty incentives and give you time to confirm that the candidate is a good hire. The potential drawback? Too many clauses and caveats may offend candidates who feel they have nothing to prove. That’s why it makes sense to structure bonuses on a case-by-case basis, accounting for the candidate’s skill set, track record and experience.
2. Decide your upper limit — and stick to it
Confident, in-demand candidates will want to negotiate the terms and amount of the bonus, so you need to know your ceiling. If that number fails to meet the candidate’s expectations, emphasize other advantages of making the move, such as work-life balance, opportunities for advancement and additional perks.
3. Don’t get into bonus bidding wars
If your competitors are handing out generous sign-on bonuses, you might feel the need to match their offers or even increase the stakes. But this isn’t poker, where you can bluff your way to success. If the sign-on bonus becomes more than your company can afford, you may end up hurting your bottom line and hiring a worker whose value doesn’t justify the upfront cost.
4. Remember that sign-on bonuses are discretionary
Market conditions can change quickly, and positions that are hard to hire for now might get easier to staff in a few months — or vice versa. That’s why flexibility is essential. Rather than having a hard-and-fast corporate policy regarding sign-on bonuses, empower hiring managers to deploy them as needed.
Sign-on bonuses are becoming more common, particularly in industries with skilled labor shortages. By understanding how to structure and use them, you can make them an effective tool in your arsenal for attracting and retaining top talent.
