A sign-on bonus is a one-time payment a company offers a new hire for accepting a job offer. Employers use sign-on bonuses to close hard-to-fill roles, match a competing offer, or make up for money a candidate gives up by leaving their current employer. The right amount depends on what the candidate is walking away from and how far your base salary sits from the market.
Sign-on bonuses are still common. According to Indeed Hiring Lab, about 3.7% of US job postings mentioned a signing bonus in December 2024, close to double the pre-pandemic average of 1.9%. NACE reports that nearly 56% of employers expect to offer signing bonuses to new college graduates in the Class of 2026.
What Is a Sign-On Bonus?
A sign-on bonus, also called a signing bonus or hiring bonus, is a lump sum paid to a new employee when they join. It is separate from base salary and usually paid once, either on the first paycheck or after a short waiting period.
Most sign-on bonuses come with a repayment agreement. If the employee leaves before a set date, they pay back all or part of the bonus.
Why Companies Offer Sign-On Bonuses
Employers use a signing bonus when they need to win a candidate without permanently raising pay. Common reasons include:
- Replacing forfeited pay: the candidate will lose an annual bonus or unvested equity by leaving their current job.
- Matching a competing offer: another company has offered more, and you can’t move base pay without breaking your salary range.
- Hard-to-fill roles: skills are scarce, such as in nursing, healthcare and specialized tech roles. Indeed found that veterinary, nursing, physician and medical technician jobs had the highest share of postings with signing bonuses.
- Speed: a bonus can help close a candidate quickly before they accept somewhere else.
How Much Should a Sign-On Bonus Be?
There is no single average sign on bonus that works for every role. The strongest way to size one is to build it from the candidate’s real situation:
- Add up what the candidate gives up. Include any annual bonus they would have received soon and the value of unvested equity they will forfeit.
- Check the gap to the market. If your base salary offer is below the market rate for the role, a sign-on bonus can bridge part of that gap in year one.
- Look at the competing offer. If the candidate has another offer, compare total first-year cash, not just base pay.
- Stay inside your budget. Set a sign-on bonus pool by level so hiring managers don’t negotiate each one from scratch.
Example: A candidate earning a $20,000 annual bonus will lose it if they leave before March. Your base salary offer matches the market. A sign-on bonus of around $20,000 makes the move cost-neutral for them, without raising your salary range.
Sign-On Bonus vs Higher Base Salary
A sign-on bonus is a one-time cost. A higher base salary is a cost you carry every year, and it also raises future merit increases and bonuses that are calculated on base pay.
| Sign-on bonus | Higher base salary | |
| Cost | Paid once | Paid every year |
| Effect on future raises | None | Raises future increases and bonus targets |
| Effect on pay equity | Keeps base pay in line with peers | Can create gaps with current employees |
| Best for | Making up forfeited pay, closing a one-time gap | Fixing pay that is below market |
If your base pay is well below the market, a signing bonus only delays the problem. The new hire will notice the gap at their first pay review. Tools like Stello AI’s Market Pricing show where a role’s pay sits against current market data, so you can decide whether to fix base pay or use a one-time bonus.
How to Structure a Sign-On Bonus
A clear structure protects both the company and the new hire.
- Payment timing: pay it in the first paycheck, after 30 to 90 days, or split it into two payments.
- Repayment (clawback) terms: state how long the employee must stay and how much they repay if they leave early. Many companies prorate repayment, so someone who leaves halfway through the period repays half.
- Written agreement: put the amount, timing and repayment terms in the offer letter or a separate signed agreement.
- Consistency: use the same rules for the same level to avoid pay equity problems.
How Are Sign-On Bonuses Taxed?
Sign-on bonuses are taxed as income. The IRS treats them as supplemental wages. Employers can withhold federal income tax at a flat 22% on supplemental wages up to $1 million in a year.
Supplemental wages above $1 million have a mandatory 37% withholding rate. Social Security,
Medicare and any state taxes also apply.
Many employers explain this in the offer so new hires aren’t surprised by a smaller check than expected.
Frequently Asked Questions
What is the average sign-on bonus?
The average sign-on bonus varies widely by role, level and industry. Entry-level and hourly roles often see smaller fixed amounts, while senior and specialized roles can see much larger bonuses tied to forfeited pay or equity. The best way to set one is to base it on what the candidate gives up and how your pay compares to the market.
Do you have to pay back a sign-on bonus?
You may have to pay back a sign-on bonus if your agreement includes a repayment clause and you leave before the required date. The terms depend on the signed agreement, so employers should put them in writing.
Is a signing bonus the same as a sign-on bonus?
Yes. Signing bonus, sign-on bonus and hiring bonus all describe a one-time payment for accepting a job offer.
When is a sign-on bonus paid?
Most employers pay a sign-on bonus in the first paycheck or after a short period, such as 30 to 90 days. Some split it into two or more payments.
Is a sign-on bonus better than a higher salary?
It depends on the goal. A sign-on bonus is better for one-time gaps, like forfeited bonuses. A higher salary is better when your pay is below market, because the gap will return every year.
