Signing bonuses can make a job more attractive. If a company does not offer a sign-up bonus as part of its original offer, it may still be possible to negotiate for one. This article will discuss how to negotiate the signing bonus. We will also examine some of the benefits and drawbacks associated with these bonuses, as well as financial goals that a bonus could help you reach.
What is the signing bonus?
Signing bonuses, or starting bonuses, are monetary incentives that a company gives you in exchange for your commitment to their business.
You may not realize that these bonuses are common. In a WorldatWork survey, 88% of organizations surveyed said they would offer signing bonuses in 2022.
A signing bonus may vary widely depending on the industry you work in and your title. They can range anywhere from a few hundred to over $50,000 depending on the position.
A signing bonus, no matter how much it is, can be an excellent financial tool. You can use the money to pay off debts, create an emergency fund, or achieve another goal.
This type of incentive is offered by the employer to compensate you for switching jobs, or refusing other job offers.
Average Signing Bonus
It is dependent on the position and industry you apply for. According to recent studies, managers and executives can receive anywhere between $10,000 and $50,000 while technical workers are more likely to get less than $5,000.
It’s important to research the industry to determine what is reasonable for your particular field, before you negotiate with an employer.
Merritt-Hawkins, for example, found that the average signup bonus paid to physicians between April 2021 – March 2022 was $31,000. The average signing bonus for physicians increased by $31,000 from last year’s $29656. This shows why you should research the industry-wide average before bargaining.
Pros and Cons of Signing Bonuses
Signing Bonus Pros
Asking for a sign-up bonus can have many benefits.
- Signing bonus can offset financial strains between jobs.
- Your signing bonus can make a great investment. You could use the strength of the stock exchange to increase your wealth over time.
- Bonuses can be leveraged: Imagine that two companies are offering you jobs, but one is giving a bonus. It may be possible to leverage the bonus offered by one company in order to get a higher salary from the other, or to request a larger signing bonus.
- A sign-on bonuses compensates for less benefits.A bonus may be given if you are offered a job that does not offer a great benefits package, or a salary below your expectations.
Cons of signing bonus:
There are some good reasons to not ask for an extra bonus.
- Bonuses could compensate for lower salaries: Companies will sometimes offer bonuses in order to increase the attractiveness of a job, but they may also be denying you a higher salary at another employer.
- You’d expect that signing bonuses would be taxed. Hiring bonuses don’t add to your total income. They are therefore taxed as they are considered supplemental income.
- The fine print could exist:As with any contract, it is important to always read all the small print. Do you expect to receive your bonus right away? You may not receive your bonus immediately if the hiring company has included clauses that prevent it.
- If you are terminated or decide to leave, the sign-up bonus may be repaid.
How do you negotiate a signing bonuses
After analyzing the potential gains and losses you will experience, if you determine that a signing incentive is best for you then you should prepare for negotiations.
These are the five tips and steps for negotiating an initial sign-on bonus.
Step 1: Await your official offer
You will be able to better gauge the bonus opportunities you may have after receiving an official offer of employment, including your salary and other benefits. If you have already received a bonus offer, it may be easier to negotiate for an even better bonus.
Step 2: Find out about salary and bonuses
Researching before you negotiate a signing bonus will help prepare your discussion by providing facts and figures.
- Ask your network of professionals for insight into what the compensation is at the particular company.
- Compare your salary offer with the salaries of other people in the same industry, including their benefits and bonuses.
Step 4: Set a budget and explain why
You may have an easier time negotiating if you can defend a specific number that you would like to get as a signing-on bonus.
Use comparisons to show your value to the business.
Mention that the company X offers a better salary and benefits, or mention that the company Y has a fantastic package of benefits — or you could even say company Z gives a bonus to candidates who have similar qualifications.
You could negotiate to have the signing-on bonus replace any bonus you will lose by moving on.
Open yourself to negotiation
Negotiate your signing bonus. You may be able to counter-offer the lower bonus if you have a set minimum you are willing to accept, and a good reason for it.
A counter-offer might be to divide the bonus and instead add half of it to your annual salary. You could also ask for 75 percent of the original offer, but add extra benefits such as vacation or insurance.
Step 5: Put it down in writing
Your signing bonus, like your salary contract, should also be included in the contract. If you don’t receive it within the agreed upon date, having it written down may allow you to take legal action. You should ask for a bonus contract if your employer does not provide one.
Make sure that all details and conditions of the contract are included. The contract should specify the amount of the bonus, how and when it will be given and for how long.
How to maximize your saving potential with a sign-up bonus
A signing bonus can be an excellent investment. Here are some tips on how you can maximize your signing bonus.
1. Create an emergency fund
A fund for emergencies can help you build a strong financial base. An emergency fund is a great way to prepare for unexpected events. You might want to start an emergency fund with your bonus if you do not already have one.
2. Stock market investment
Stock market investing can prove to be an excellent long-term option. Investor.gov states that people who make long-term investments in the stock market tend to get positive, strong returns. You can potentially multiply your sign-up bonus by investing it in the stock markets.
3. Repay outstanding debt
Credit Karma’s average member debt was around $50,000 by the end of 2022. Many people strive to be debt-free. A signing bonus can be an option for those who are among the millions of Americans with debt.
4. Use it to pay for student loans
Around 43 million Americans have student loans. Your signing bonus could help pay off a portion of your student loan debt.
What’s next? Plan your finances.
You can now plan how you will use your signing bonus to achieve financial success. You can stay on track if you create a plan to pay off your debts with your signing bonus.
Decide how you will use the money. You can use the avalanche or snowball methods, among others. It is important to choose a strategy that you will stick with.
Plan your spending of the signing bonus if you want to reach another goal.