Signing Bonuses

Methodology

Most people understand the basics of signing bonuses, but let’s go over them anyway.


The amount.  Probably the simplest part of it - the dollar figure stated in the offer letter you’ve received.  Though most people look at this, dream of the new motorcycle or Louboutin heels they’re going to buy with it, and move on, there are actually two additional elements you should consider.


The clawback.  Almost all companies attach what’s called a ‘clawback’ to a signing bonus.  This means, essentially, that you don’t get to keep all that money they’ve given you if certain conditions are met.  The two most common elements of a claw-back are the time period and whether it’s pro-rated or not.  The time period is simply how long the clawback applies for, and is typically one year from the data of the payment provided.  Pro-rated simply means whether you pay back the full signing bonus, or only a proportion of it that is the same as the proportion of the year you’ve been at the company.  Let’s take a look at an example:


(This is Amazon’s language)

“If your employment with the Company is terminated for any reason prior to the one-year anniversary of your Start Date, you will be required to repay the unearned prorated portion of the sign-on payment.”

(This is Amazon’s language) In plain English, this means if you leave after six months - for any reason, either your own choice or Amazon’s - you have to pay back 50% of your signing bonus (6 of 12 months).  If you leave after nine months, you pay back 3/12 or 25% of your signing bonus.


The taxes.  Signing bonuses are a form of income, and are taxable just like every other form of income.  If you’re in a 25% tax bracket, a signing bonus of $10,000 means what you actually receive will be no more than $7,500 (and often less, since the company will also withhold other required taxes).  Since all your cash income is taxed this way - we’ll leave equity out of it for now - it shouldn’t change your calculation of the signing bonus’ value.  But some people forget this, and thus expect more from their signing bonus than they actually receive.


OK, on to the fun stuff!  Let’s take a look at actual signing bonus data from some of the big tech companies.  Here’s what we’ve compiled from our recent users - if you’d like to help us fill it in, or check your offer signing bonus against our data, let us know.