Over on the Compensation Force Blog, there’s a post about the recent increase in sign on bonuses for recent college grads. I think that this information suggests a growing trend towards more flexibility in negotiating sign-on bonuses across the board as companies continue to try to source creative incentives to attract top talent and keep employees motivated.
Sign on bonuses, once considered a perk for senior executives, have trickled down into lower levels of management and now seem to be a reasonable expectation even for recent college graduates.
When negotiating salary, it is important to recognize that base salary is just one aspect of total compensation that completes your total rewards package. Research from Mercer Human Resources Consulting indicates that employers continue to seek ways to attract and retain employees through variable pay incentives including monetary rewards for completing project milestones, spot rewards for exemplary effort on a one-time initiative, and cash incentives for employee referrals that turn into new hires.
So what does all this mean for job seekers? It means that you may have more options than you may realize when negotiating your compensation package. Think creatively about how to get to that magic number. If an employer can’t offer you what you would like in base salary, think outside the box to come to a consensus about what they can give you that would make the offer more enticing. This could take the form of a sign-on bonus, an earlier performance review, a financial reward somewhere down the line for a project well done, a different job title, a more generous expense account, a blackberry and a computer, or something else that is valuable to you.
Focus on building the relationship with the employer and getting them to love you. Once this is achieved, discuss your compensation needs in terms of what is fair and reasonable. Be flexible, acknowledge the employer’s needs and work together to find a solution and you will quickly achieve your goals.
Signing bonuses also have their disadvantages.
For example, companies will put strings on the bonus such as the need to pay the bonus back in full (even though you paid taxes on it) if you leave the company within a period of time. It is a financial way to hold a person in a position. So don’t spend the bonus until you know you like the company and the management.
Also, a signing bonus is not part of your salary. This has some implications.
First, you are now paid less than if the bonus was included as salary. Think of applying for credit where bonus dollars are discounted because bonuses are not the same as salary. How much more would the bonus have helped you with the salary?
Second, the bonus doesn’t count toward any pension calculation if a pension is available. It is based upon your salary.
Third, your percentage salary increases in later years are lower in dollars because the bonus isn’t part of your salary.
Fourth, many companies offer a yearly bonus that, among other things, is based upon a percentage of your salary. Having a smaller salary lowers the amount of future bonus dollars available to you.
Signing bonuses are not a slam-dunk in the equation. They require analysis, just like the rest of the position and pay.
Scot,
You’re right on all counts. Sometimes the sign on bonus can be the tipping point for making the offer better. Other times it just won’t cut it and the job seeker needs to renegotiate the position to see if the title, responsibilities, and salary range can be elevated to create a compensation package that is more in line with the market value and the job seeker’s expectations.
But often, people leave money on the table because they don’t even realize that a sign on bonus may be an option, so it is certainly something to explore during some salary negotiation conversations.