Sign-on bonus – what, why, and does it work? How?
Professionals can spot many offers announcing sign-on bonuses when looking for a new job. This trend has been increasing recently, and its popularity depends on the industry.
This article will explain what a sign-on bonus is, how does it work, who offers it, why it is used… And most importantly, how important should it be for job seekers.
What is a sign-on bonus?
Sign-on bonuses are monetary amounts offered to potential employees if they accept a job offer. They are also known as signing bonuses.
They can be given in one lump sum after joining the company or given in different amounts during a limited period at the beginning of the contract.
Sometimes they are given once some trial time has passed. It is a method to retain talent.
Their amounts can vary from $150 to $100,000. Workers sometimes want them to equal or be over the amount of money they are resigning in their former job, which could be in the form of a bonus for seniority or stock options. It is key to research what kind of bonuses are being offered in each industry.
Sign-on bonuses can also come in the form of benefits like stock options or extra holidays.
As said in the introduction, this practice is getting more common in recent months.
In July 2022, 5.2% of all job offers advertised a sign-on bonus in the US.
They have appeared as a consequence of the demand for workers being strong after the COVID-19 crisis.
Which companies usually offer them?
In general, they are used when the competition in the market is fierce and companies are desperate to attract talent. That is why they have commonly been used in management and executive positions. IT companies are also jumping into this trend.
The sector with more presence of sign-on bonuses is the business services one, followed by health care. And the professionals receiving them are mostly working in sales.
The place where they are most common is the United States. 4 out of 5 sign-on bonuses offered, come from the US. In that country, they are highly used by medical care professionals. More than 10% of the job offers in healthcare jobs offer a sign-on bonus. It goes up to 18% for nursing positions.
Moreover, the fast-food chain McDonald’s is also offering hiring bonuses to new crew members. They offer a $500 sign-on bonus and an additional $50 just to attend the interview. It demonstrates that companies in all sectors can offer these bonuses.
Why does a sign-on bonus benefit companies?
The main reason behind sign-on bonuses is to attract the best talent.
Aside from bonuses for new employees, they can also be offered to former workers obtaining a new role. Especially if the new role requires a change of location or a higher workload and more responsibility.
For example, in 2020, Goldman Sachs Group in the UK offered eight sign-on bonuses to former workers who were material risk takers. The total bonuses accounted for $2.5m. It is common for other banks and companies to offer appealing bonuses for positions which imply lots of risks.
Are they valuable to employees?
A bonus is always a positive asset. However, it is important to research the market before deciding which offer suits you best. Sometimes a sign-on compensation will not cover a lower salary or poorer labour conditions.
It is critical not to be dazzled by a great bonus. Many other variables need to be considered.
However, there is proof that companies with extraordinarily high sign-on bonuses cannot retain employees. For example, the average sign-on bonus on Facebook is $45k and on average worker, retention is around two years. Meanwhile. Microsoft sign-on bonuses on average are $20k and average worker retention is nearly four years.
This shows that a sign-on bonus is a tool to attract talent but it does not work to retain it.
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