Signing Bonus Negotiation 101

A signing bonus negotiation isn’t just for top executives anymore. But before launching a signing bonus negotiation, you’ll need to think through your strategy and various options carefully.

By on / Business Negotiations

Signing bonus negotiation

After engaging in a successful salary negotiation for a coveted job, most people are ready to shake hands and start sharing the good news with friends and family. But these days, there may be one more negotiation you should consider launching before saying yes: a signing bonus negotiation.

Get Ready for a Signing Bonus Negotiation

A signing bonus is a one-time sum offered early in your tenure with a new organization. Typically, if you leave the organization in less than a year, you will be expected to pay back any signing bonus you’ve been given. A 2016 survey of trends in bonus programs and practices conducted by World at Work, a nonprofit human resources association, found that 76% of the organizations surveyed offer signing bonuses, which are the most common form of bonus program.

Signing bonuses are most typically awarded to top executives, upper management, middle management, and professional staff, World at Work learned. For managers and executives, signing bonuses typically ranged from $10,000 to more than $50,000. For clerical and technical workers, signing bonuses tended to be less than $5,000.

Why Organizations Offer Signing Bonuses

Employers offer signing bonuses for the following reasons, according to Monster.com:

  • To beat the competition. The more “in demand” you are, the more likely employers are to instigate a signing bonus negotiation with you to win you away from their competition.
  • To skirt internal salary equity practices. If you ask for a salary that is above the upper limit for your prospective level or position, the employer may try to make up the difference by launching a signing bonus negotiation.
  • To compensate you for foregone income. If you would lose an expected bonus or other benefits by leaving your current employer, the hiring organization may try to compensate you by opening up a signing bonus negotiation.

How to Ask for a Signing Bonus

If a company is eager to get you on board, there is a good chance that hiring personnel will raise the possibility or even promise of a signing bonus with you even before you have received a concrete offer. If you are offered a signing bonus with a particular dollar amount, don’t assume it’s a nonnegotiable figure. Just as it’s important to try to open a salary discussion, you generally should try to launch a signing bonus negotiation.

What if you aren’t offered a signing bonus? If you are sure you have negotiated as hard as possible on salary, consider opening up a signing bonus negotiation. An employer that is reluctant to commit to a higher salary, one that will continue to rise during your tenure with the organization, may be more open to negotiating a one-time signing bonus. In fact, they may even welcome the opportunity to make the job more attractive to you. It helps to offer a justification for your request. For example, if you would need to buy a new car because of a longer commute, you might ask for a signing bonus to help with the down payment.

How to Bargain Salary During a Signing Bonus Negotiation

If a potential employer promises you, say, $10,000 just for showing up to work for a year, it would be natural to plunge into this signing bonus negotiation with gusto. However, there may be a reason to approach the negotiation with caution.

Be aware that employers sometimes offer signing bonuses strategically. As we noted, it’s much easier to offer you a one-time bonus than to bump up your salary for the duration of your employment. From your perspective, you will do far better financially over the course of your career if you can manage to convert that signing bonus offer into a higher salary.

Thus, when offered a signing bonus, you might use the offer to renegotiate salary. For example, if you are offered a $5,000 signing bonus, you might say: “While I’d be happy to take the bonus, I want to make it clear that I see myself working here for quite a while. I’d prefer to reduce the bonus to $2,500 and have the remaining $2,500 added to my salary. I believe this demonstrates my long-term commitment to the organization.”

If the employer is open to this possibility, they are likely to make a counteroffer. Let’s say you and your counterpart ultimately agree to reduce the $5,000 signing bonus to $1,500 and add $2,500 to your annual salary ($4,000 total). You would earn back the $1,000 reduction in the signing bonus in under a year, and earn at least an extra $2,500 every subsequent year. If an organization wants to hire you, it may adopt a short-term mindset and pay you less now in exchange for potentially more later on.

What strategies have you used with success in a signing bonus negotiation?

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