Sign-on Bonus

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."

Related Terms

benefits, base salary, incentive compensation, total compensationsales commission