Why are employees given a “signing bonus”? Isn’t the salary enough incentive to join?
In: Other
Because a signing bonus is a way for them to appear more attractive with a temporary expense. This works well whether the employer is paying market rate and wants top notch talent without paying above that and messing with their future budget. If a really good candidate is on the fence about picking between my company or another company, the signing bonus might just push them over to our side while being a temporary expense. (I.e. the cost is one time as opposed to a permanent wage increase that carries over quarter after quarter and is very likely more expensive for the company).
*or*
if the employer is paying below market rate and wants to appear closer in line to or above market rate, it mainly targets people that doesn’t process delayed gratification as well or are more desperate for money without a permanent increase in wages. If I’m offered a $5,000 bonus but the salary is $3,000 a year below market rate they save after the second year.
One primary example is the military that offers signing bonus to lure teenagers of age to sign up despite the fact that they could be earning more in the long run if they do vocational training or work for wages in the open labor market. There are many strategies and benefits they use to appear more attractive and this is just one of them.
TLDR: it’s just another method to incentivize people to join just like other benefits. There will be people that will value a temporary bonus over higher wages if other employers are on the fence about their candidacy.
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