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(This question is actually for a friend, so I don't know exactly all details).

Background: Full time engineer at a large multi-national company. Making about 85k/year after 3.5 years with company.

New contract: Offered to sign a 3 year contract (no leaving!) that will come with a 25k signing bonus (one time). I imagine if one was to leave, they would have to pay back the bonus.

Anyway, in my opinion, the deal isn't that great. It's 25k for the 3 years, so about 8k/year. Once this gets taxed, you are left maybe with 5k every year. I know there is normal salary increase every year and whatnot, but still. I think I could find a new job (I am a software engineer though) and get that sort of bump in salary pretty easily.

Is there a rule or guidelines or something to determine if a signing bonus for a fixed-term contract is fair? I think my friend should negotiate, but he is hesitating.

  • Does that new contract also include about 85k/year plus the 25k bonus? Or is it a different base salary? – DarkCygnus Sep 9 '19 at 18:57
  • @DarkCygnus, as far as I know the contract does not specify salary. It would be the base salary as determined through performance reviews + the one time bonus of 25k. – Catsunami Sep 9 '19 at 19:01
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    Well, we need to know how much will this new salary be in order to determine if it's "reasonable". If the salary were the same as now (85k/y) then it would be a good deal. Now, if the salary will be lower, then perhaps not... – DarkCygnus Sep 9 '19 at 19:02
  • @DarkCygnus, historically his raises have been about 5% per year. So if it stays on track, the annual salary will be about 90k on average. – Catsunami Sep 9 '19 at 19:08
  • I see, so it will be with the current company. So basically he will renew contract probably earning the same (or more), plus the bonus? – DarkCygnus Sep 9 '19 at 19:09
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Is there a rule or guidelines or something to determine if a signing bonus for a fixed-term contract is fair?

Fair is a complex word to use... but anyways, it's "fair" if it's beneficial to you (or your friend in this case).

You friend has been working there for more than 3 years. That tells us that your friend is comfortable there and performs well. Thus, signing a contract for 3 more years would seem to be something that your friend is ok in doing (that is, most likely he does not plan to leave before that date).

You also mention your friend is making about 85k/year.

If this new contract is at least 85k/year plus the 25k bonus, then it would seem like a "good deal" (it's more than the current money he gets).

If the salary is going to be lower than 85k/year then perhaps it would not be a good deal, and should be analyzed carefully before making a choice.

At the end of the day, only your friend knows all the details about the new contract and the circumstances of their lives, and he should decide on what is best for them.


Update: You mentioned that your friend is currently on a permanent contract. To some people, changing a permanent contract for a fixed-term one could not be worth it.

Now it's clear why they are offering the bonus.

Your friend has to consider if they are willing to leave a Permanent position for a fixed-term one plus a bonus (one that could not be renewed after the 3 years expire).

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