The Truth About Sign-On Bonuses

A sign-on bonus is the biggest misnomer in all of hiring. Why? Well, think about it. Are cash sign-on bonuses just given to sweeten the pot, just to get you to sign? They may have been at one time, but in today’s world, a sign-on bonus serves a different purpose. So, let’s explore the real reason behind sign-on bonuses today.

My name is Michael Pietrack, Pharmaceutical Recruiter and the host of The Pharmaverse Podcast. I've personally been involved with hundreds of offers, and I’ve come to the conclusion that a sign-on bonus should really be called an offset bonus. Here's why:

📗 Sign-on bonuses are used to offset financial forfeitures that aren’t covered by the other elements of an offer. For example:

🔺A candidate’s current base salary will be canceled out by the new base salary (often with a slight increase).

🔺The annual bonus for the role will likely cancel out, as the target percentage is typically the same.

🔺 The stock package a candidate has at their current company will be canceled out when they switch to a new company.

📗 But here's where things get tricky:

🔺 A person might be walking away from part of their annual bonus and transitioning into a prorated bonus with the new company. For instance, if the candidate's start date is exactly halfway through the year, they would lose half their bonus. In that case, the offset bonus would compensate f