Sign-on or signing bonuses are a lump-sum of money offered to a potential employee to entice them to “sign-on” with the employer’s company. Employers do this in the hope that it will act as an incentive for the candidate to accept the job offer. 

Seventy-six percent of employers like to use signing bonuses to attract key personnel, as reported by the World-at-Work survey. The survey findings are in line with what many recruiters think – employers today actually have to sell themselves to the prospects. And an upfront payout can be quite an attractive benefit for many job-seekers. 

There was a time when signing bonuses were mostly used for those graduating with exceptional skills entering highly in-demand industries like some medical professions and IT. But due to significantly reduced unemployment rates, signing bonuses have become the go-to for hiring blue-collar workers like security and construction.

When the economy is doing well, and competition for talented candidates is fierce, this makes signing bonuses one of the most effective ways to get a candidate to accept the job offer.

But sign-on bonuses do more than helping a company secure top talent. Here are 4 reasons why including signing bonuses in negotiations is beneficial for the employers:

It sets you apart from competition

When you offer a sign-on bonus to the applicant, it automatically sets you apart from many (or all) of your competitors. It can mean the difference between a prospect accepting or declining your job offer, especially if it is a candidate-driven market. 

Also, if the applicant is planning to leave their current job before getting their annual bonus, giving them a signing bonus during negotiations can drive them to finally make the move.

It saves money in the long-run

The signing bonus is also financially more compelling for the company than offering a higher salary since it is a one-time payment.

It means the company can keep the department budgets down and save a lot of money in the long-term. If the employer were to offer an increase to the applicant’s base salary, it ultimately raises the bar for yearly bonuses as well as the principal amount for when the applicant is promoted. 

So, for example, if the applicant is asking for a $3,000 per year increase to their salary, and HR is unable to do that, they could instead counter with a $4,000 signing bonus. This may mean loss for the company in the 1st year, but every year after that the company will be benefiting from not having to pay that increase on a yearly basis. 

However, it’s pivotal to include a clause with the signing bonus that ensures the candidate will stay with the company for a set amount of time, typically two to three years or even more depending on the size of the signing bonus. 

It helps cover differences in salary and benefits 

At the end of the day, the goal of the company is to close the discrepancy in pay and benefits as much as possible while still staying true to their budget. If you have a tight budget, a signing bonus can act as a counter to the salary and perks package which doesn’t match the expectations of the candidate. 

If the candidate is feeling uncertain about your job offer due to a longer commute, less vacation days, or a lower bonus structure, a signing bonus can help sway their decision.