What’s a Signing Bonus? Should You Offer One?
If you’re looking to attract new talent, a signing bonus is one way to sweeten the compensation package you offer to highly qualified candidates. Unlike traditional benefits like healthcare insurance, paid sick days, and vacation/paid time off, a signing bonus is a one-time benefit paid at the start of employment with the company.
“A signing bonus is an incentive that a new employee would receive when signing a new contract,” says Nate Masterson, HR Manager for Maple Holistics. “The reason companies do this is to beat out their competition. The typical signing bonus is given at a rate of between 5-10% of the base salary and is taxed at 25%. That means that if the signing bonus is $5,000, you’re really getting $3,750. Unless the bonus is especially gratuitous than it’ll be taxed at 40%.”
Because a signing bonus is an added expense in the recruitment process, it’s typically only extended to sought-after candidates with highly desirable skills. However, in a competitive setting, offering a signing bonus may make the difference in whether the candidate accepts the employment offer or not.
There are risks associated with signing bonuses, however. An employee may accept the bonus but quit shortly thereafter, making the incentive a loss for the business. Because of this, employers often ask their new hires to sign a contract agreeing to commit to a certain length of employment in return for the bonus, or the employee is contractually obligated to pay the bonus back.
Also, if you offer signing bonuses to certain recruits but not others (such as existing employees who are promoted inwardly), this could hurt employee morale. Consider the ripple effect your decisions may have.
Regardless of these “what if”s, offering a signing bonus can favorably influence a candidate’s decision to join your company. If you use Fingercheck payroll, you can cut an employee a signing bonus check with ease using our check calculator.