Sign-on bonus

What sign-on bonuses are actually for

The legitimate uses are specific: buying out value the candidate forfeits by moving (unvested equity, a bonus due next quarter), bridging a one-off gap without distorting the salary band, and winning a genuine bidding situation. The illegitimate use is papering over a base salary the market has rejected; a sign-on big enough to do that just delays the resignation to month thirteen, after the clawback lapses.

Structuring one properly

Write down the amount, the payment timing (on start, or split across milestones), the repayment terms (full or pro-rata if the person leaves within, typically, 12 months, and which kinds of exit trigger it), and the tax treatment (it is employment income, taxed accordingly). Pro-rata clawbacks are easier to defend and to actually collect than cliff-edge full repayment, and carve-outs for redundancy and serious employer breach are both fair and standard.

The signals to manage

Internally, sign-ons are invisible in the pay system but visible in the corridor; a pattern of large sign-ons for new joiners while incumbents wait for review cycles is how pay compression becomes resentment. Externally, a sign-on is a one-time fix: it changes the acceptance decision, not the year-two retention curve, so it should always be paired with an honest look at why the ongoing package needed rescuing.