Great Resignation: Here's how to get the most out of a sign-on bonus

At a time when competition is fierce for qualified job candidates, employers are more likely than ever to throw in extra bells and whistles to their compensation packages.

Enter the sign-on bonus.

If you’re lucky, companies will tell you exactly how much money is on the table if you accept a job with their firm. According to analytics firm Global Data, which tracks job listings, there was a five-fold surge in the number of companies that advertised a sign-on bonus between August 2020 and August 2021.

Still, even if they don’t post their bonus offers online, that doesn’t mean companies aren’t willing to pay up handsomely to attract talent. Over the course of my career in content marketing and journalism, I’ve successfully negotiated an additional $160,000 in upfront sign-on bonuses on top of base salary and equity grants.

If you’re not sure what to ask for or how to make the case for a sign-on bonus of your own, here are a few tips:

Cropped shot of a young therapist meeting a couple for a counselling session
(Photo: Getty Creative)

Add up the value of unvested stock grants, 401(k) matches, and other incentives

The first time I negotiated a sign-on bonus, my request was simple — I knew I had $30,000 worth of unvested equity that I’d have to kiss goodbye if I quit. I asked for a sign-on bonus to cover that loss and they agreed.

There are pros and cons to this approach and trade-offs to be considered. The biggest benefit to accepting cash and forfeiting stock options or RSUs is that you get your money upfront rather than having to wait for a future vesting date. Of course, the opposite could be true as well. If your company suddenly goes on an earnings tear and the stock price shoots up after you’ve quit, you have to live with knowing you missed out on all those gains.

Personally, I agreed on an employer equity strategy with my financial planner many years ago that I have always stuck to. As soon as my RSUs vest and become available for me to sell, I immediately cash them out no matter what the stock price is at the time and diversify the proceeds by investing in mutual funds. I just don’t like holding big chunks of equity in the same company that pays my bills. So, for me, it made sense to go ahead and forfeit my RSUs, accept a sign-on bonus from my new job, and immediately invest the proceeds in the stock market like I would have anyway. The choice is up to you.

Factor in lost income from reduced freelance capacity

A student using his smartphone while taking a break from work with a coffee in a local café.
(Photo: Getty Creative)

It’s become increasingly popular for workers to leverage skills for additional income streams outside of their regular jobs. If a new employer demands more bandwidth from you that will require you to reduce the number of hours you can spend on other work, factor that into your sign-on bonus request.

Let’s say you’ve been tutoring part-time on the side and you’ve got a couple months worth of work scheduled that you would have to cancel. Ask the recruiter for a sign-on bonus that would cover that lost business income. Or, if you’ve been consulting independently and a prospective employer wants to bring you on full-time, add up the number of consulting hours you’d be dropping in order to work for them.

Read the fine print

Sign-on bonuses are incredibly attractive but they usually don’t come without strings attached. Be prepared to sign an agreement that states you’ll stay with the company for six months to a year or else repay your sign-on bonus in full.

If you’re not sure you’re 100% sold on the company but you don’t want to turn down “free” money, consider parking the funds in a savings account until you’ve passed the year mark. That way, if you decide to leave, you won’t be scrambling to come up with the funds you need to pay them back.

On the flip side, if you are entertaining a new job offer and don’t want to pass up the opportunity, you could always ask the new company to cover the expense of paying back your previous sign-on bonus. It’s worth a shot.

Remember: Sign-on bonuses are nice, but they aren’t everything

Businessman introduces new employee young woman to diverse coworkers. Attractive excited happy female holds box with stuff getting acquainted with millennial colleagues has first workday in company
(Photo: Getty Creative)

I absolutely love the wealth-building potential that comes with sign-on bonuses. I’ve been able to pay cash for large expenses like my wedding, honeymoon, and even pay off my husband’s student loan debt with the proceeds from sign-on bonuses over the years.

But I would never recommend taking a new job simply to get a cash windfall. Make sure you’re jumping ship for an opportunity that ticks a few other boxes, too. Higher base salary, a promotion or nicer title, better health benefits, flexible remote working privileges, and generous parental leave policies are other perks to consider as well. Ultimately, you should be looking to get much more out of a new job than the sign-on bonus alone.

Mandi Woodruff-Santos is inclusive wealth-building advocate, career expert and co-host of the popular podcast Brown Ambition. Her work has appeared in CNBC, Business Insider, Teen Vogue and U.S. News & World Report.

Follow her for more tips on career and wealth-building: Instagram: @mandimoney and TikTok: @maaandimoney

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, YouTube, and reddit.