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Context is North America, Information Technology.

When applying for jobs in the current market, signing bonuses are becoming more prevalent. These typically come with a tenure-based clawback clause, where the candidate must repay the bonus if they leave (or are terminated) within a certain period of time.

If a candidate does not want to be held to the requirements of the signing bonus, how can they reject the bonus without this immediately being seen as a red flag? Is there a way to handle this situation gracefully?

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    How long is the clawback period? Is it onerous? Doesn't seem unreasonable to want a commitment in return for the bonus
    – cdkMoose
    Mar 16, 2022 at 14:05
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    @JoeStrazzere It does make sense to reject it and argue for a higher salary instead. I'd rather make 10K in salary than in a signing bonus. I'd even rather take 7-8K in salary, on the assumption that I'll stay more than one year. For some people there's also the mental feeling of obligation that they'd rather not deal with. In fact that's part of why they add a clawback to the bonus.
    – Gabe Sechan
    Mar 16, 2022 at 22:06
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    It might make sense to decline, as taxes are removed from payment, but the full amount is expected to be returned (not a lawyer, and not sure this is always the case, but my naive reading has left me with that implication in some cases).
    – owenfi
    Mar 17, 2022 at 2:09
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    @Kevin, 1 year commitment is hardly a commitment, You'll be 6 months just getting up to speed and then only 6 more to keep your bonus.
    – cdkMoose
    Mar 17, 2022 at 12:47
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    @owenfi Mitigating that somewhat, if you have to return the bonus in the same tax year you received it, the company is responsible for getting the taxes back from the IRS, not the employee.
    – chepner
    Mar 17, 2022 at 14:13

8 Answers 8

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Is there a way to handle this situation gracefully?

Yes, you can ask for the bonus to be removed and negotiate an increase in salary and/or benefits in its place.

By doing this, you will not be viewed as someone who plans to leave after a short time, rather you will be showing that you are invested in and fully committed to this new opportunity.

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    How exactly is this seen as someone who wants to stay long? Basically, I just read the facts and a statement but I don't see how you come to this conclusion.
    – Mayou36
    Mar 16, 2022 at 21:45
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    @Mayou36 If you trade a 10K bonus for a 7K increase in salary, it means you expect to stay longer than 1 year or you just argued your pay down.
    – Gabe Sechan
    Mar 16, 2022 at 22:09
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    Well, you expect to stay for long enough that the $7K/year will exceed the $10K flat...or you plan to leave soon enough that you won't get the $10K flat either way so it's free to trade it away for something else.
    – amalloy
    Mar 16, 2022 at 22:32
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    @GabeSechan Not necessarily; if your base salary is 7K higher, you can use that when negotiating a better deal with the next employer. Regardless of who you work for, that 7K is likely to stick for life (which is a good reason to ask for it, and a reason why companies prefer spot-bonuses!)
    – Fiora the Ferret
    Mar 17, 2022 at 8:55
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    @amalloy: It depends on the clawback period. Simply put, if you ask for a $2.5k raise in exchange for a $10k signing bonus; it can either mean that you intend to stick around for less than the clawback period (but with minimal gains) or at least 4 years. If the clawback period is short; it's highly unlikely that you're aiming to leave that soon. If the clawback period is long, then it starts to become inherently reasonable for any applicant to rather avoid such a long clawback period.
    – Flater
    Mar 17, 2022 at 10:18
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I don't see any con of just accepting the bonus and then put it into some safe type of saving that will give a small growth over time. Worst case you quit in a way that forces you to pay the money back and you lost nothing but actually gained whatever small growth your savings have accumulated.

Saying no however will always be against you since it will basically say "I don't plan to stick around for long".

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    And of course making sure that the amount you are paid excepting the signing bonus is sufficient pay for you.
    – DJClayworth
    Mar 16, 2022 at 16:48
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    Another alternative is negotiate for some other benefit, like extra paid time off, instead of the signing bonus. But, if the company's goal is to put some hooks into new hires to try to prevent churn, that probably won't work.
    – ColleenV
    Mar 16, 2022 at 17:44
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    Worth noting that there can be some pretty tedious tax implications if you end up leaving and having to pay the bonus back in a different tax year than when you received it. In that case, the company will want the entire bonus back before taxes, and you'll have to claim the difference back from the IRS yourself (in the US at least).
    – user4867444
    Mar 16, 2022 at 22:19
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    @ColleenV: I believe some companies in California basically do this in lieu of non-competes, because those are unenforceable under state law. You see the same game played with stock vesting periods...
    – Kevin
    Mar 16, 2022 at 23:26
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    You could suggest to the company that instead they put in your contract a payment to be made after a period of service, e.g. one year
    – user7761803
    Mar 17, 2022 at 10:57
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Rejecting it would be foolish - it's equivalent to holding up a flashing neon sign saying "I'm planning on leaving during the clawback period", even if that's not what you actually plan on doing it's the way it will be interpreted. And if you are planning on leaving in that timeframe? Well it's still not smart to advertise that fact to a company that's clearly wanting you to stay, they'll simply move on to the next candidate.

Taking the signing bonus and just stashing it in an instant-access savings account without spending it is a far superior approach, this way you can simply comply with any clawback requirements if/when they become necessary, you might even reap some interest on the amount while it's in your account. If you stay and escape the clawback period - great! You can then enjoy a nice windfall with no stress.

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    As pointed out in a comment under another answer though, there are tax implications based on when you received the signing bonus and when the clawback occurs. It really is designed to make it a hassle to leave before the clawback period, even if you have the money to pay them back.
    – ColleenV
    Mar 17, 2022 at 18:32
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    Trying to negotiate for a higher salary instead, especially if the sought salary bump is less than the amount of the signing bonus, sends a message of planning to stay multiple years, but actually works out in the employee's favor even if they leave within the clawback period.
    – WBT
    Mar 18, 2022 at 18:14
  • @WBT negotiating a higher salary is always an option, but it never sends the message that an employee is here for the long run, even more so when they're refusing the signing bonus. Everybody wants a higher salary, regardless of their future plans.
    – Emile Bergeron
    Mar 18, 2022 at 20:48
  • Maybe this is a cultural difference but to me, this arrangement is like an employer holding up a flashing neon sign saying "I'm not going to try to be a good employer you'll want to stay with." If the employer proves to be a good employer then I will stay. I would refuse this arrangement to ensure the employer invests in employee satisfaction.
    – lala
    Mar 28, 2022 at 14:45
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It is hard, but you could try to just say you want a stronger base salary.

Assume offer:

150k/year +10k signing bonus

Reply:

I was hoping for a bit stronger base offer, around 155k, but also signing bonus exceeds my expectations. Would it be possible to re-balance offer to 155k base + 5k signing bonus?

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    I'd expect the company to not trade bonus for salary at a 1:1 rate. The smaller bonus gives you less incentive to stay, and the higher salary costs them more in the long run, as they have to pay it every year, and raises will also apply to the salary but not the bonus. Perfectly fine to negotiate at this stage, but worth being aware that $10k in salary is a considerably bigger ask than a $10k bonus. After 5 years with 3% raises, the $10k bonus costs the company exactly $10k, but $10k salary will cost over $53k.
    – Nuclear Hoagie
    Mar 17, 2022 at 14:09
  • @NuclearHoagie good point, but too strong :) you assume increases are fixed % of the starting base, and this is not true.
    – NoSenseEtAl
    Mar 17, 2022 at 23:51
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    With no raise at all, it's still $50k - the raise is really not the important part of that calculation.
    – Nuclear Hoagie
    Mar 18, 2022 at 13:12
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Assuming a typical: one year pro-rated claw back clause.

In the first year there really is no advantage to negotiating all salary instead of lower base + sign on bonus (you come out the same regardless of if you stay for the full year or not).

The issue comes in year two - some companies are fairly bureaucratic such that they will look at salary changes as a percent increase over the previous year - for example all "good performers" get a 7% increase.

Hence you may get more money year 2 if you have a higher base in year 1.

I doubt HR see the sign-on claw back as a retention mechanism (for same the reason I gave above) instead they are probably either, using the sign on bonus:

  1. As a mechanism to control overall salary expenditure (in the long run this will manifest as you constantly butting up against the salary limit for each position you have).
  2. To control the risk associated with the hire - meaning they want to get people through the door, but at the year 1 pay review they will bifurcate the salary significantly based on performance (top performance get a big raise, others don't)

My suggestion would be to let the company know that you don't see any real difference (in year 1) between all salary vs sign on bonus. Then ask them why they are offering a sign on instead of all salary.

Another strategy would be to call their bluff:

  • Say the numbers are 150 K salary + 10K sign-on
  • Ask for 158 K salary no sign on bonus.

Asking for 160 K salary is asking for something for nothing, by asking for 158K there is a real trade (dropping 2 K in the short term for more money down the road).

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    and of course make sure that if they cancel your contract within that first year they don't get their bonus back. I've seen contracts that had such clauses for performance bonuses, for example stating that you had to repay your performance bonus if you left employment FOR ANY REASON during the next year.
    – jwenting
    Mar 18, 2022 at 9:09
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A bonus is a bonus - it's all good.

Yet when comparing an offer A/year with a clawback bonus B vs. another offer C/year, consider comparing A + (1.0 - chance of leaving during clawback period)*B/5 years vs. C and not A + B vs. C.

(5 years for typical job tenure - adjust as needed.)

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If sf02's answer does not work, then negotiate the bonus to be paid at the clawback date rather than upon hiring. If questioned, say you are not comfortable holding money that may have to be returned. This should not perturb anyone.

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    The instant follow up to "money that isn't mine" is "I don't understand, it is yours." What an awkward conversation this would cause.
    – foreverska
    Mar 16, 2022 at 21:24
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    Negotiating the bonus as being contingent on a certain minimum period of employment seems perfectly reasonable to me. it turns the issue of perception into a +1 for the Op and ensures that a borderline-predator hiring practice doesn't turn into a trap later on down the road. I consider this to be the best answer. I think that there is a tendency to significantly downplay the sticky vagaries of babysitting a lump sum of money to which one isn't unconditionally entitled.
    – Beau
    Mar 16, 2022 at 22:36
  • @foreverska Bad choice of words. Fixed.
    – Michael McFarlane
    Mar 17, 2022 at 1:23
  • @Beau This could still be predatory and used by companies with no intention of letting you stay for a full year. They entice you to apply and accept a lower salary by telling you of a large one year bonus and then pull the curtains a few months before you get to it.
    – Flats
    Mar 17, 2022 at 18:35
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    @Flats This is entirely possible, with or without the conditional advance. And nothing is without chance. But the ask was to specifically avoid accepting a clawback, and I consider this to be the wisest move, given that stipulation.
    – Beau
    Mar 17, 2022 at 18:52
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Take the bonus. Most companies never collect even if you leave the company early. Really the smartest way to go about this, from the company perspective, is to pay a part upfront, and parts throughout the claw back period.

Say you get a 10K bonus and work there 60% of the time necessary. In most jurisdictions you would only be required to pay back 4K. If they ask for it, and you say "no", it will cost more to collect. So they forget about it.

This happened to me where I got 10K with a year claw back. I worked there about 6 months. I felt that I had a decent chance of winning a case as my job changed quite a bit from the one I was hired for. One day I get a call from someone claiming he represented the company as a lawyer and demanded immediate pay back. He wins every case and all kinds of negative things will happen to me if I do not comply. Holding to my guns I still said "no". Eight years later I still have not heard from them. I am pretty sure the guy was just a debt collector.

They have to first win a law suit (which they may lose due to some technical error in the document), then actually collect. It is not as easy as one might think. They may also lose the law suit and have a counter suit against them.

In most jurisdictions it would be illegal to collect it from your last paycheck.

Saying no to the bonus and asking for a hire salary will likely be fruitless.

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  • Most companies never collect even if you leave the company early Have you any reference or report or study that says this ? I'm quite skeptical that many corporations would have the option to get money from a former employee and decline it - call me cynical but that's not the image in my head of the corporate world.
    – StephenG - Help Ukraine
    Mar 18, 2022 at 4:16
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    most companies never collect? Never heard of a company that wouldn't collect every cent they can from a leaving employee, it being a bonus with such a clause, training expenses, or a tiny scratch on a company car that normally wouldn't be fixed when the car was traded in but is suddenly an issue costing you hundreds of Euros.
    – jwenting
    Mar 18, 2022 at 9:11

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