Finding qualified candidates can be difficult, especially if you are recruiting for a hard-to-place industry like healthcare or engineering. And even when you find them, there’s no guarantee they will accept the job offer.
To sweeten the job offer and encourage a candidate to accept, you might convince your client to offer a signing bonus. Learn what a signing bonus is, when to offer it, and tips for negotiating one between your client and candidate.
What is a signing bonus?
A signing bonus is a lump sum of money given to a candidate when they accept a job offer. Sign-on bonuses are used to attract top talent, fill executive-level positions, or get candidates with specialized skills to accept the job offer.
So, how do sign-on bonuses work?
Generally, signing bonuses are paid after candidates go through the steps in the hiring process, clear their background checks and begin working at a company. Depending on the terms, the bonus might be paid all at once or in increments.
Sometimes, candidates need to sign a written agreement when they accept a signing bonus. This signing bonus agreement might say that candidates need to work a certain length of time before leaving the company. If the employee leaves early, they may need to pay the money back or have the amount deducted from their final paycheck.
Although offering signing bonuses has many positives, there are also negatives. Candidates might expect the amount of money each year. And, candidates might accept the job for the money rather than the overall fit.
Reasons your client should offer a signing bonus
Offering a signing bonus is one tactic hiring managers use to get candidates to accept job offers. Read on for specific instances when a sign-on bonus can encourage job acceptance.
1. To fill a salary gap
If there is a gap between the salary a candidate wants and what your client is willing to offer, you could lose out on making the placement. The number one reason candidates turn down a job offer is because the salary is too low, according to Top Echelon’s 2018 State of the Recruiting Industry report.
To make up for the discrepancy between a candidate’s salary expectations and the actual offer, your client might consider paying the one-time signing bonus.
Although the money is only paid once, candidates might consider the value of receiving the money upfront. A signing bonus can be good for your client because they do not need to pay the amount each year.
2. To cover relocation costs
For many companies, the perfect candidate might not be in close proximity. Recruiting outside of the immediate area opens the door to more candidates with specialized skills.
Getting these candidates to apply for the job is one thing, but getting them to accept the job offer is another. A signing bonus can help convince a candidate who is on the fence to accept the job. The signing bonus helps cover relocation costs, which could eliminate one of the candidate’s concerns.
3. To get candidates to accept a hard-to-fill position
In certain industries, candidates are sparse. The talent your client needs might already be employed, or another company might be recruiting them. To get the candidate to accept the offer at your client’s business, you need to raise the bar.
Encouraging your client to offer a signing bonus will give their company the advantage. It shows that your client wants the candidate and is willing to invest in them. And, it makes your client stand out from the competition.
Average signing bonus
There is no standard signing bonus. Amounts vary based on salary range, industry, the candidate’s experience, and location. Or, a signing bonus could be a percentage of the candidate’s offered salary.
According to the Harvard Business School, the median signing bonus for all industries is $25,000. Oppositely, the Kelley School of Business reported an average signing bonus of $5,000.
SHRM suggests that signing bonuses can range from $1,000 – $1,000,000.
Signing bonus negotiation
Conduct research on average signing bonus amounts for the industry you are recruiting in. Take into account the other factors that impact signing bonuses, including location and the candidate’s qualifications. That way, you can help your client come up with a fair and attractive signing bonus offer.
As the recruiter, you will pass information between your client and candidate. You will extend the job offer to the candidate and let them know about the signing bonus.
If the candidate asks for a larger signing bonus, you will need to talk with your client and negotiate the terms.
