“Job Offer On the Way? – Consider Asking for a Sign-On Bonus”

“If it scares you, it might be a good thing to try.”

– Seth Godin

ACTUAL “CASE HISTORIES: Carrie was not at all pleased with her job. Though it sure seemed glamorous to be in charge of all wholesale sales in South America and Latin America for her employer, a luxury clothing company, she soon tired of the constant travel. And, too, her boss and Carrie no longer saw things eye-to-eye, as they once had. In fact, she had grown to dislike him immensely. She thought, why not seek something new? Though the job market was anything but robust, Carrie contacted some of her friends in the fashion industry, and put out the word that she was “available” for the right job.

Through a recruiter she had met some time earlier, she learned of a position training and overseeing junior clothing salespersons. Though Carrie did not think of herself as the “teacher-type,” she did agree to an interview, and over her interviews, grew more and more interested in leaving pure sales and moving into the “human capital” field. It surely piqued her interest. After learning that she was among the top two candidates, Carrie was eager to accept nearly any decent offer presented. She was, however, concerned about the cost of relocating her residence for the job.

When Carrie consulted us, we suggested she consider asking for something she had never considered: a sign-on bonus to help her address relocation costs. After a little bit of coaching, and a whole bunch of nervousness, Carrie did ask for a sign-on bonus, and was elated when her request was agreed to.

LESSON TO LEARN: Acquiring and retaining the right “human capital” is seen today as a truly critical component of organizational success. When the right candidate is found, and when that candidate gives a good reason for a sign-on bonus, an employer will at least give serious thought to the request. These days, such requests – under the right circumstances and posed in the right way – are being granted with increasing frequency.

Here is a sample of a typical sign-on bonus agreement or provision:

“If you become an employee of the company, you will be paid a sign-on bonus of $30,000, less legally required deductions and withholdings. It will be paid to you 1/3 within thirty (30) days of your first day of work, 1/3 within sixty (60) days of your first day of work, and 1/3 within ninety (90) days of your first day of work. If you voluntarily resign before one full year of your first day of work, you will have to repay one half of your sign on bonus. If you are discharged from employment without having committed “cause” for firing, you will not be liable for any repayment of the sign-on bonus.”

Requests for sign-on bonuses are most appropriate when (a) the employee is being heavily recruited or is surely the number one candidate, (b) the employee is leaving an apparently stable position or location, (c) the employee will be forfeiting earned bonus or commission, or coming compensation, and (d) the new position will entail additional time, expense or investment of some kind by the employee, such as relocation costs, education costs, legal costs or clothing allowance.

HERE ARE 7 THINGS TO CONSIDER WHEN ASKING FOR A SIGN-ON BONUS:

1. Do not be afraid to ask; just ask nicely. In my 30+ years of counseling employees in their negotiations, I have seen more employees “under-ask” than “over-ask.” And I have learned with conviction that, so long as requests are made respectfully, there is little if any downside in making a request.

2. When you ask, present your request with a sensible rationale. I would like ten apples” may sound like a lot of apples for one person to ask for, but if it is preceded by “I have twenty hungry kids who missed their lunch today” that makes that request seem quite reasonable, and thus worthy of a “yes” response. Likewise, requesting a sign-on bonus is all the easier if preceded by a reasonable rationale. Here are three:

(a) “Due to my necessary relocation expenses . . . ”,
(b) “In light of my loss of a year-end bonus by leaving my present employer . . . “,
(c) “Because of the legal costs incurred in voiding my non-compete agreement . . .”, and
(d) “Since I will need to pay for continuing education in this new role . . .”.

It is the rationale, or reason, that accompanies any workplace request that makes the request that much more likely to be agreed to.

By the way, resignations can be tricky – and treacherous. To help you, we offer a 100-Point Master Pre-Resignation Checklist. All you need to know and remember. To obtain your copy, just [click here.] Delivered by Email – Instantly!

3. The word “bonus” sounds extravagant; the words “reimbursement” and “loan” do not. Using the word “bonus” may suggest to some that you are asking for something very expensive, that you have not earned. For this reason, instead of “bonus” you might use different words and phrases that do not conjure up images of large unearned sums. With attention paid to the appropriateness of the phraseology, consider calling the sign-on bonus you are asking for (a) a forgivable loan, (b) reimbursement for future expense, (c) “make-whole” payment, (d) “transition adjustment” payment, (d) salary “subsidy,” (e) advance, or (f) allotment.

4. Consider offering conditions that make the request seem more “palatable.” As you can imagine, no employer wants to pay a sign-on bonus and then see the recipient leave just a few months later. For this reason, you can make your request that much more palatable by adding “Of course, to ensure that you receive your money’s worth, I would earn it over time, and it could get paid in installments.” Another example of such a “palatable” condition would be “Naturally I am prepared to promise to pay the bonus back if I left before a year.” Understanding and anticipating the other person’s concerns is always a wise thing to do in any negotiation.

Another example of a condition that would make a sign-on bonus more easily accepted by an employer is to make payment over time, such as 1/3 after the first month, 1/3 after the second month, and 1/3 after the third month.

5. Whenever the word “pay” is used, the phrases “paid when?” and “earned when?” should be clarified. As someone who reviews compensation agreements of every type, I make it a practice to ask myself “Does it also say when the payment is to be made and when the payment is considered earned.” The same applies to sign-on bonuses. Here is the kind of sentence I look for (although the amount and time are just examples): “The sign-on payment of $1,000 will be paid within thirty (30) days of your first day on the job, and will be considered earned if you stay on the job at least one year.”

BACKGROUND CHECK COMING UP? Do you have an “Indiscretion” or “Very Personal Issue” that might come up? We offer a Model Letter to SHARE A “VERY PERSONAL ISSUE” to explain it, and seek its acceptance, in pre-emptive fashion. No one is perfect, and no one’s life history is perfect, either. Explain it the right way. What to Say, and How to Say It.™ To obtain your copy, [click here.] Delivered by Email – Instantly!

6. Do not be surprised to see a repayment, “clawback” or “set off” conditions placed upon your sign-on bonus. To protect themselves, employers often require that, after you’ve been paid a sign-on bonus, if you voluntarily depart the job before it is fully earned, then you have to repay the amount paid, or at least part of it. This is called “repayment” or “clawback.”

A related protection sometimes required by employers permits the employer to deduct the amount you need to repay from your final paycheck. This is called a “right of set-off.” Both “clawback” and “right of setoff” are reasonable, provided your departure is truly “voluntary,” and not requested, coerced or imposed.

Here’s a valuable pointer: If your sign-on bonus provision, letter or agreement says you have to repay it if you leave the company “for any reason,” ask that the word “voluntarily” be inserted either instead of that phrase, or before that phrase, as this will give you leverage to negotiate the point if later laid off or you resign “involuntarily.”

We offer a Model Letter to Request a Sign-On Bonus (or Other Up-Front Payment), containing six alternative rationales. It shows you “What to Say, and How to Say It.™ To obtain your copy, [click here.] Delivered by Email – Instantly!

7. Don’t presume sign-on bonuses are only for senior managers and executives. Quite often, when I write newsletters about strategies to garner bonuses and other forms of compensation, I receive emails from blog visitors that express the sentiment, “These things are not for my level; if I made a sign-bonus request, it would not be taken seriously.” It is my experience that almost any request is appropriate for any employee, so long as it is respectfully submitted and reasonable in amount or size. For example, if a receptionist being considered for hiring by a dentist is truly a wonderful receptionist, with lots of dental office experience, he or she may even be able to attract new patients she has met while working for other dentists in the neighborhood. I am confident that such a receptionist could well be successful in requesting a bonus to make an employment move.

If you agreed to repay your former employer (a) tuition reimbursement, (b) relocation expenses, (c) a sign-on bonus, or even (d) a short-term loan, you may be able to have that obligation waived and forgiven. We offer a Model Letter for Repayment Obligation Forgiveness – with 18 Great Reasons, just [ click here. ] “What to Say, and How to Say It.™ – Delivered by Email – Instantly!

Don’t be defeatist. Don’t limit your potential success. Keep an open mind and – provided you are a person of value and integrity – nothing is impossible, no matter on what “level” of employment you may toil.

P.S.: One of our most popular “Ultimate Packages” of forms, letters and checklists is entitled “Ultimate New Job Package” consisting of 10 items, including Resume Cover Letter, Thank You After Interview, Memo Confirming Terms Offered, Response to Offer Letter, our Master Checklist of Items to Negotiate, and 50 Good Reasons to Explain Your Departure from Your Last Job. To obtain a complete set, just [click here.] Delivered by Email – Instantly!

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SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. Negotiation and navigation of work and career issues require that you think “out of the box,” and build value and avoid risks at every point in your career. We strive to help you understand what is commonly before you – traps and pitfalls, included – and to avoid the bumps in the road, while proceeding “down your path.” Knowing how and when to ask for a “sign-on” bonus may be a solid step toward acquiring that knowledge and understanding you need to succeed at work.

Always be proactive. Always be creative. Always be persistent. Always be vigilant. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” That’s what SkloverWorkingWisdom™ is all about.

*A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.

Please Note: This Email Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel, and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.

Sklover Working Wisdom™ is a trademarked newsletter publication of Alan L. Sklover, of Sklover & Company, LLC, a law firm dedicated to the counsel and representation of employees in matters of their employment, compensation and severance. Nothing expressed in this material constitutes legal advice. Please note that Mr. Sklover is admitted to practice in the state of New York, only. When assisting clients in other jurisdictions, he retains the assistance of local counsel and/or obtains permission of local Courts to appear. Copying, use and/or reproduction of this material in any form or media without prior written permission is strictly prohibited. All rights reserved. For further information, contact Sklover & Company, LLC, 45 Rockefeller Plaza, Suite 2000, New York, New York 10111 (212) 757-5000.

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