Are Sign-on Bonuses an Effective Recruiting Tool?

Two experts debate the issue.

By Chelsea Stearns, SHRM-CP, and Lindsey Garito, SHRM-SCP August 29, 2022
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Sign-on bonuses show candidates you value them.

Chelsea Stearns


Companies across the country are competing ferociously for the same talent as they try to survive the Great Resignation. In June 2022, job openings were at 10.7 million, while the number of people voluntarily leaving their jobs was 4.2 million, according to the U.S. Bureau of Labor Statistics.

Employees know they can easily find another job because there are many available. So what can you do to attract and retain talent?

It’s time to get creative and consider sign-on bonuses.

A 2022 survey by Salary.com found that only one-third of responding companies said they are utilizing sign-on bonuses, so those that choose to offer them stand out to applicants. A sign-on bonus demonstrates to the candidate that you value them and are willing to compete if that is what it takes for them to join your team. Sign-on bonuses can help make up for an inability to match a job candidate’s salary expectation or to pay relocation expenses. 

Rather than offering a higher salary that the organization will be expected to support during the entire lifespan of the employee’s tenure, you are offering a one-off payment. This enables the employer to provide more-substantial salary increases over time and to encourage the employee to continue achieving. By offering sign-on bonuses rather than higher base salaries, employers hopefully won’t have to worry about reducing compensation budgets when the market cools down.

Many HR professionals wonder why they can’t attract the right candidates. It’s probably because those candidates aren’t looking for new jobs. Only about 10 percent of job seekers are actively and urgently looking for new employment opportunities, according to a 2021 survey of 5,000 U.S. workers by Indeed. A sign-on bonus can be used to pique the interest of more-passive candidates by providing an incentive and proving that the grass can, in fact, be greener on the other side. Not only do passive candidates typically have stable employment histories, but they probably aren’t interviewing with many other companies, which gives you a leg up on the competition.

After the perfect candidate accepts your offer and begins work, you cross your fingers, hoping they will stay with the company for an extended period. Sign-on bonuses can help you to relax and entice them to stay. When these bonuses are given out in increments, employees are motivated to remain at the company at least until they have received the full amount. 

Earlier this year in Chicago, for example, United Airlines was offering a $10,000 sign-on bonus to part-time baggage handlers. This sign-on bonus is paid in monthly installments and requires employees to stay with the company for at least one year; otherwise, they must pay back the funds. 

Often, if the sign-on bonus is significant, it can be paid out over a two-year period. The sign-on bonus can also be contingent upon the employee achieving specific goals or staying with the company for a certain period. If these goals are not met or if the employee leaves the company prematurely, these payments can be clawed back. Of course, all of these terms need to be put in writing and agreed to by the new hire and the company. 

Although sign-on bonuses are not the “magic pill” we are seeking to cure the Great Resignation, they are necessary to compete during these unprecedented times. 

Chelsea Stearns, SHRM-CP, is associate director of employee experience at QinetiQ in Lorton, Va., and an adjunct ­faculty member at Georgetown University in Washington, D.C.


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The effectiveness of a sign-on bonus is short-lived.

Lindsey Garito


Sign-on bonuses are typically used as a tool to attract and hire new external talent. They’re commonly utilized in a competitive talent market, such as the one we are facing today, in which job candidates are receiving multiple offers and being more selective about where they choose to work.

These bonuses also may be utilized when a top candidate is looking for higher compensation than the organization is willing to pay and the employer wants to offer an initial incentive to help offset the difference. A sign-on bonus can be a quick fix to secure talent and make a hire that would otherwise be difficult to land.

However, the effectiveness of the sign-on bonus can be short-lived. Candidates might decide to accept a job offer for the wrong reasons if they’re focusing exclusively on monetary factors. In cases when the sign-on bonus is used to mitigate the company’s inability to meet the candidate’s desired salary, the individual might remain unhappy with their base compensation and leave to accept a more competitive offer. 

The most effective hires will be those who accept a job offer because they value the professional opportunity, see a path for growth, have a sense of purpose, will be doing meaningful work, and feel a connection to a strong manager and team. A sign-on bonus won’t be able to retain employees if these elements aren’t part of the employees’ experience. Instead, they will likely leave soon after receiving the sign-on bonus.

Why is this important when trying to hire? Throughout the Great Resignation, we have seen that compensation is not the driving factor for attracting or retaining talent. The focus has shifted to flexibility, engagement, respect and meaningful work. Gallup’s recent State of the Global Workplace report highlights how low engagement leads to higher turnover. In addition, a recent McKinsey & Co. survey found that 40 percent of employees are somewhat likely to leave their jobs within three to six months. This means it is imperative for organizations to ensure they aren’t focusing so much on hiring that they forget about their existing employees.

A strategic total rewards program is critical for continued organizational growth and success. Investing in ongoing compensation and benefits programs is more beneficial than providing a one-time sign-on bonus. The focus should be on building meaningful and more-robust opportunities to offer compensation incentives that create greater impact for current and new employees alike. 

So how can we effectively recruit new talent while engaging and rewarding our current employees? A more effective recruiting tool would be to turn a sign-on bonus into a dual incentive bonus that links existing employees with referrals and the hiring of new employees. Under this approach, instead of providing incentives just for new hires, bonuses are paid to both the new employees and the current employees who referred them. 

Typically, companies use one or the other—a sign-on bonus or a referral bonus. Great people know great people, so an incentive that rewards both the new hire and the existing employee who made the referral will be even more successful. 

Existing employees can be valuable ambassadors and help serve as an important recruiting base for top qualified professionals. 

Employees can earn extra compensation incentives by referring great talent from their personal networks to help fill current job openings and staffing needs for the organization—a win-win.    

Lindsey Garito, SHRM-SCP, is director of human capital management and total rewards at Summit Health in Rye Brook, N.Y.

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