How A Signing Bonus Works for Organisations

A signing bonus, sometimes called a hiring bonus, is a one-time lump sum payment at the start of a new employee’s contract. Businesses offer these bonuses to high-quality prospects to entice them to apply. Signing bonuses can serve as a one-time increase in their wage at the start of their employment or stock options.

In exchange for signing a work contract, the new employee will receive financial compensation beyond their agreed-upon wage. These arrangements are usually kept confidential. A bonus can be as much as 10% or more of the employee’s base salary, but this amount varies based on the industry you operate in and your hiring goals. 

Employees typically receive the money when they sign their employment agreement, but some companies may have alternate structures. For example, some may pay this amount over the employee’s first year in the position.

Granting a financial incentive can help improve job seekers’ interest in your company. Here’s how a signing bonus can help you retain top talent. 

Occasionally, a role will open within your company that requires more specialised knowledge. Candidates with niche expertise are in higher demand and lower supply, resulting in higher wages and more desirable benefits to draw them in. 

A signing bonus can push a potential employee to work for you rather than for a competitor. Alternatively, if someone migrates from a similar position in another company, it can compensate for any benefits lost from their old company to yours.

Attracting top-tier talent involves offering higher wages and competitive benefits, but the best package isn’t always feasible for your company. 

A signing bonus avoids ongoing, potentially yearslong commitment to programmes and schemes you cannot afford because it’s a one-time payment.

One of the most important reasons to implement a signing bonus as part of an employee’s contract is your competition. These bonuses have become more commonplace in many industries due to the lessened supply within the labour market. 

If a direct competitor offers an initial hiring bonus and you don’t, they have an advantage in attracting the best minds in your industry.

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A lump sum signing bonus can range from a few hundred pounds to £5,000 or more. The actual amount fluctuates between industries, companies and positions, so calculating how much you should offer is difficult. 

There has been a distinct increase in the number of companies offering signing bonuses and the amount of those bonuses, especially among engineers, pharmacists, drivers and in social careers. 

Some businesses will advertise their signing bonus in the job descriptions to help narrow a candidate’s choice. If that’s the case, then negotiating for more is often unnecessary. But if a bonus isn’t advertised or a candidate would like a higher amount, they’ll most likely negotiate after they’ve received an official offer. Typically, the hiring manager will start the conversation, but the candidate might broach the topic if their skills are in high demand.  

Negotiating a signing bonus differs from your typical negotiations with an employee. Because these bonuses are often offered to people with invaluable skills and experience, they have more bargaining power. As a result, it’s essential to enter this situation prepared with strategies that keep the proceedings fair and amicable. 

Other companies within your industry offer signing bonuses, likely for the same position you need to fill. Researching the amount they provide gives you an idea of how valuable the candidate is, creating a precise starting point for the negotiation process.

It’s crucial to begin negotiations by determining the amount the new employee hopes to get as a signing bonus. Their answer may be much higher than you’re willing to pay, but that doesn’t mean they’re not willing to compromise. 

Explaining the other schemes employees will receive working for you can make their signing bonus expectations more flexible. However, exercise caution if they’re coming from another company. You won’t know what a competitor offered in their benefits package, and yours might lack something the candidate had in their old position.

Missing or lesser benefits aren’t likely a dealbreaker, but they can increase the amount the new hire expects from their signing bonus. 

Before signing a bonus negotiation, you should assess your business’s finances and determine how much you can comfortably pay. With that information in mind, you know the amount that’s a dealbreaker and the lower limit that’s reasonable for the position’s responsibilities. 

Define Goals & Link Them to Bonus Payouts

Make your employees’ development visible by defining and tracking both qualitative and quantitative targets. If targets are linked to bonus payments, results are automatically transmitted to payroll.

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Don’t require potential new employees to accept your offer (or counteroffer) immediately. Giving them time to consider and accept the final signing bonus on their terms helps ensure they join your staff with no regrets. Employees assured of joining a company are more likely to stay long term. 

The employer offers extra financial support in exchange for a candidate agreeing to work for them. This incentive can be a lump sum added to their first pay packet or paid out over time. For some organisations and in some industries, paying out a signing bonus in stock is acceptable as well.

The average signing bonus varies between industries and companies. They typically offer between a few hundred pounds to £5,000 or more. 

A lump sum signing bonus is often paid once the employee receives their first pay packet. This may change depending on your company’s policies or your industry standard.

Candidates with high-demand skills are typically the people who are offered signing bonuses. 

Signing bonuses should be negotiated after you’ve given the employee an official job offer. 

One of the best ways to recruit top talent, and to get them on board, is to offer a seamless candidate experience. That requires an excellent talent management software, like Personio, to help you streamline the entire process. 

Using Personio, you can post jobs, intake candidates, interview them and run an automated and seamless recruitment process from start to finish. Then, you can send and sign offers and turn candidates into employees in a single click. Speak with an expert to learn more today.