TALENT

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  • Keys to Competing for Talent

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    How to Sweeten the Pot with a Signing Bonus

    You read about signing bonuses all the time in the sports world. But businesses large and small also rely on signing, or sign-on bonuses, to close hiring deals. They are most often used for hard-to-fill positions or to entice a particularly talented candidate to come aboard.

    A sign-on bonus is generally calculated as a percentage of the base salary, and can range from five to 20 percent of the starting salary offer. It can be paid all at once or in installments and is fully taxable as regular income. Bonuses can be used to offset relocation expenses or to make up for lost incentives or other forfeited employee benefits triggered by leaving a job. Because it’s a one-time event, it does not add to your company’s long-term expenses.

    You can tie a signing bonus to an employment time frame for retention purposes. For example, the new employee may agree not to leave the company for a specified period of time. Another way to do this is to offer a signing bonus that is payable at some future date. This is sometimes referred to as "stay pay."

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    A signing bonus can be a powerful recruiting tool. To protect your company, consider crafting your bonus with a clawback provision, which lays out rules for how the employee will pay back the bonus if certain stipulations aren’t met. For example, if the employee leaves or is terminated within a certain time period, a prorated portion of the bonus must be repaid. For more on clawbacks, visit this site.