Understanding Your Signing Bonus

By Wendy Burt

Ahhhh. The joy of the lump sum. Nothing says “welcome aboard” like a signing bonus. With visions of that new boat or remodeled kitchen dancing in your head, you’re eager to get that ink flowing. But before you commit your Jane Hancock to the dotted line, make sure you know what you’re getting into.

And the Survey Says ...

According to a recent survey taken by the American Compensation Association, 60% of the responding companies offer sign-on bonuses in hopes of attracting and retaining employees.

Not surprisingly, the survey found that upper and middle management were most likely to receive the offers, which were awarded as a flat dollar amount 84% of the time.

Of the payouts given, only 40 percent required a split pay, in which part of the money was given upon hire with the remainder given after a set period of time. The remaining 60 percent received their entire bonus upon hire.

On average, 35 percent of employees did not forfeit their signing bonus – or need to reimburse the company – if they left the company, even within a short period of time. This is especially encouraging for executives who might jump ship before their first year.

Also encouraging was that of the upper management bonuses, a whopping 67 percent were more than $10,000. (And you thought were kidding about the boat!)

Deciphering your signing bonus

Although all in all, the results of the survey were encouraging for executives, it’s important to remember that signing bonuses are as varied as the companies that offer them. Here are a few questions to consider when being offered a signing bonus.

1. Will I still be eligible for performance bonuses?
Some companies offer a signing bonus in lieu of performance bonuses. If this is not the case, ask when you’ll be eligible for your first performance bonus and how often you’ll be reviewed (ie. once per year). Be sure you’re clear on how your performance bonuses are determined (ie. sales goals or low turnover rate, depending on your position).

2. Is this bonus split with part paid upon hire and part paid after a set time?
If your signing bonus is split, find out exactly when you’ll receive the remaining part of your bonus. Also, be clear on what percentage is received up front. You don’t want to learn later that they’re only offering 10 percent up front and 30 percent after three-month increments.

3. Do I forfeit any or all of my bonus if I leave before a certain time period?
This is always a tough question because there may be concern on your part – and the part of the employer – that the question implies and intention to quit soon after hire. Still, it’s a reasonable question. If you do forfeit some or all of your money, ask how much and what your time period is. It may help you make decisions if you do decide to leave. There’s also a chance that you may have to pay the money back if you receive all of your bonus upon hire.

4. How much are other companies in this industry offering executives in my position with my experience?
This is more of a research question, as the employer may not know the answer to this question or may be hesitant to answer. Check the Internet for employment sites that list average signing bonuses for your industry, position and experience.

Signing bonus or stock options?

Many companies are now offering stock options in place of signing bonuses. This is especially true with start-ups, whose stocks have not gone public yet, the theory being that employees will take the chance that their stock shares will be worth more than their signing bonus after an IPO. The offer is certainly one to ponder, as some employees have literally “struck it rich” overnight. On the other hand, most companies’ stock ends up worth little – leaving you with nothing gained and a signing bonus lost.

Evaluating the company stock options

If you truly believe that taking the stock options may be a smart financial choice, do your research.

When weighing the pros and cons of stock options, consider some of the following questions to determine possible factors in the value of company stock:

  • Is the company growing or downsizing?
  • Is the company a result of an acquisition or a planned expansion?
  • Has the growth affected its profitability?
  • What is the growth potential of the company’s products/services?
  • What is the company’s market share?
  • Who are its competitors?
  • How do other employees feel about owning company stock?
  • Have past employees chosen stock over signing bonuses?
  • When does the company plan to go public? (if not already)
  • What percentage of the company stock would you receive?


Of course, there are always other options. Why not ask for a split between cash and stocks? Or how about a smaller signing bonus in exchange for more frequent performance reviews?

If you’re feeling uncomfortable with the offer, speak up. There’s no harm in attempting to negotiate. After all, despite the employer’s position behind the big desk and stack of résumés, you’re the one holding all the cards – and the pen.

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Wendy Burt is a freelance writer in Colorado.