What Is a Sign-On Bonus? Definition, Benefits and Tips
Updated 23 May 2023
Starting bonuses are financial incentives organisations can offer when they want to hire someone for a position. You can often earn a starting bonus after a certain length of time in a position. If you're applying for roles with starting bonuses, learning what they are and knowing how they work can help you better understand your compensation. In this article, we explain what sign-on bonuses are, detail why organisations offer them, explore how they work, list their benefits, provide the steps you can follow to negotiate one and offer helpful tips you can use to get a starting bonus.
What is a sign-on bonus?
A sign-on bonus is a financial incentive an organisation can offer to encourage candidates to apply for the role. It's often a lump sum of money the organisation pays to the candidate after hiring them for the position. For example, a bus driving position may offer a starting bonus of $1,000 for new drivers in addition to the $35 per hour wage.
Why do organisations offer sign-on incentives?
These are some reasons an organisation may offer sign-on incentives:
Hire quickly: If an organisation is understaffed, it may offer a bonus to find more staff. This can be especially true for organisations in which the team members provide direct service, like in a restaurant.
Balance compensation: Organisations that offer lower salaries and wages may offer starting bonuses to make up for the lower pay. A sign-on bonus can make it more worth it for a potential candidate.
Fill a role: When someone vacates a role within a business with little notice, the business may offer a starting bonus to fill the position quickly. For example, if a grocery store loses its bookkeeper, it may need to fill the role as quickly as possible to continue managing financial information.
Attract talent: Starting bonuses may help organisations attract talent that may otherwise apply for positions at other firms.
How do sign-on incentives work?
Though some organisations offer their starting bonuses immediately after the individual accepts the job offer, many use an instalment plan to ensure the person stays in the role for a certain amount of time. This helps organisations avoid hiring candidates who may take the starting bonus and immediately quit. For example, a factory offering a $1,500 starting bonus may give the person $500 when they complete their training, $500 after 40 total hours and $500 after 80 total hours.
Benefits of sign-on incentives
These are some benefits of sign-on incentives:
Higher initial earnings: As a candidate, when you apply for a role that offers a starting bonus, you can make more money when you initially begin in the role. This can increase your overall earnings and help you get ahead on your finances.
Pay for equipment: A stating bonus may help new hires pay for the clothes, tools and equipment they use when on the job. For example, a new server may purchase non-slip shoes when working in the restaurant, and a starting bonus can help them pay for that.
One-time payment: As an employer, a sign-on bonus can be beneficial because it's not an ongoing payment, but rather something you only pay once. This can help you gain the benefits of a higher compensation package without having to continuously offer that sum.
Team member satisfaction: When a team member earns a starting bonus, they may feel more valued. This can help to increase satisfaction and happiness in the workplace.
How to negotiate a sign-on bonus
Some positions may offer low starting bonuses, and some may not offer them at all. As a candidate, you can negotiate with the hiring team to secure a bonus for yourself or to increase the amount you're receiving. You can use negotiation skills like communication, active listening and research to help you. These are some steps you can follow to negotiate a starting bonus:
1. Research before your interview
The first step to negotiating a starting bonus is doing research about the industry and the specific hiring organisation. Using salary websites online, you can learn more about the average starting bonus for the position to which you're applying. You can also talk to the contacts in your professional network to learn more about what others have received when accepting a similar position.
Be sure to consider your qualifications, the current market, labour supply and the economy when determining what you think you can get for a starting bonus. For example, if you have a unique skill set and you know there's a shortage of labour for the industry, you may be able to ask for a higher starting bonus.
2. Wait for the hiring manager to make an offer
Though you may already know the figure you want for your starting bonus, it's respectful to wait for the hiring manager to make an offer and discuss salary figures first. Also, it helps you avoid agreeing to a bonus that's lower than they're willing to pay. For example, the organisation may give starting bonuses of $5,000 to new truck drivers. If you do your research and begin the conversation by asking for $3,000, you may end up getting considerably less than what you could.
3. Provide counter-offers until you reach a fair amount
After the hiring team offers you a compensation package, you can respond with a counteroffer to begin the negotiation process. If the hiring team doesn't offer you a starting bonus, you can start by requesting one. Here's an example of what you might say:
Example: 'I noticed the salary for the compensation package is lower than I expected. I would feel far more comfortable accepting this position if there was a starting bonus to balance the compensation here'.
If the hiring manager offers you a starting bonus, but it's lower than the amount you want, you can still respond with a counteroffer. Be sure to remain polite and concise when responding with a counteroffer. Here's an example answer:
Example: 'I appreciate the starting bonus you've included in this package, but I would feel more comfortable accepting this offer if it was closer to my expectations. I think $3,000 seems closer for my skills and experience'.
4. Obtain information about the bonus in writing
After coming to an agreement with the hiring team about your bonus, ensure you get the information in writing to ensure all relevant parties, such as human resources, have the same information. Be sure to have them include it in the contract you sign so everyone understands the amount you receive. There are many people who contribute to the hiring process, and the person who disperses your bonus may not be the person who negotiates with you.
Tips for getting a starting bonus
These are some helpful tips you can use to get a starting bonus when you start your next position:
Search for jobs that are offering them. Some job listing sites may allow you to filter your search for roles offering a starting bonus. This can provide you with a list of starting bonus positions from which you can choose the ones for which you're most qualified.
Consider industries that often offer bonuses. Industries may use starting bonuses more often than others. For example, factories may offer starting bonuses more often than other organisations.
Use your professional network. Consider asking some contacts in your professional network if they know of any roles with starting bonuses. A contact may know of a role within their company that isn't listed publicly.
Review local advertisements about jobs. Many organisations advertise their open positions and starting bonuses in the newspaper and in local ads. Be sure to scan advertisements when you're in public to learn more about potential starting bonus opportunities.
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