Sign-on Bonus

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Moneyzine Editor

Last updated on September 26th, 2023

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Definition

The term sign-on bonus is used to describe a one-time monetary award offered as part of a larger compensation package proposed to professionals being offered a job at a company. At one time, only high-level executives were offered a sign-on bonus. However, in today's workplace, they are commonly offered to several levels of management professionals.

Explanation

Also known as a signing bonus, a sign-on bonus is normally offered by companies as part of a short-term incentive compensation plan. Because the money paid is a one-time event, it enables the company to attract new talent, while not adding to the long-term expenses of the company. The sign-on bonus is not part of the job applicant's base salary.

A sign-on bonus is usually calculated as a percentage of the base salary, and can range from 5 to 20% of the starting salary offer. Payment may also be tied to employment at the company. For example, by accepting a sign-on bonus, the new employee may also agree not to leave the company for a specified period of time.

Employees may also be offered signing bonuses that are payable at a future point in time. This is sometimes referred to as "stay pay."

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