When the economy is booming and competition for top talent is fierce, offering a sign-on bonus during salary negotiations can be an effective way to convince a highly sought-after candidate to accept your job offer.
Apart from helping you secure top talent, there are multiple benefits for both you and your organisation to offer a sign-on bonus. Here are 5 reasons why you might include them in your negotiations.
A sign-on bonus is a one-off financial compensation paid to a new employee when starting within a new organisation. Generally, they are offered to mid-level and senior-level employees, rather than entry-level employees. We have for example noticed that sign-on bonuses are becoming increasingly popular for highly sought-after profiles such as FP&A Manager and Head of Controlling.
One of the greatest perks of offering a sign-on bonus is that it can set you apart from your competitors. This extra edge can make the difference between a candidate accepting your job offer or not, especially in such a candidate driven market. If a candidate is planning to leave their current employer before receiving their annual bonus, offering a sign-on bonus during salary and onboarding negotiations can motivate them to make a move. If you are faced with a tight budget, a sign-on bonus can also be a great counter to a salary or benefits package which doesn’t match the candidate’s expectations.
Since a sign-on bonus is a one-time cost for an organisation, it's financially more interesting than offering a higher monthly salary. In addition, salaries come with social security costs for an employer, which increases overall company cost across the board. Last but not least, they help build the foundation for a positive relationship between an employer and its new hire. The new employee will immediately feel a sense of trust and will be motivated to go the extra mile.
There is no specific rule here, but usually a sign-on bonus for employees at mid or senior level is around 20% of the agreed gross annual salary. If you are trying to compensate for a missed annual bonus, that amount can be further negotiated until both parties are satisfied.
To prevent an employee from leaving soon after signing-on, we advise employers to add a clause in the employment contract whereby the employee agrees to refund the amount (partially or pro rata) if they leave the company before a certain period of time.
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