Why are signing bonuses growing?
Talent shortages are the obvious culprit, but remote work and inflation may be contributing, too.
Signing bonuses are nothing new.
They have been a long-standing practice in exec comp for addressing walk-away value. For law school grads, they put a little cash in your pocket so you can buy a suit and squeeze in a vacation before the grind starts.
But signing bonuses are growing in popularity. The trend is well-documented for frontline workers. This Indeed study notes job postings advertising signing bonuses have tripled since 2019, driven by professions like nursing, dental, and childcare.
So what about knowledge workers?
Many comp leaders I’ve spoken with lately describe an upward tick, both in bonus size and frequency of use.
You can share how you’re approaching signing bonuses in the comments below.
What has changed?
Talent shortages are an obvious factor. Much like the housing market, supply is down because things feel uncertain, and people are waiting to see what happens.
Market uncertainty drives higher transaction costs, and, in purely economic terms, that’s exactly what a signing bonus is (econ fans can check out the Coase theorem).
I suspect a couple more factors are at play:
Inflation may have an effect. If pay guidelines tend to lag the market, then they’re not keeping up with the recent spike in inflation. Signing bonuses could act as a relief valve.
Sagging tech valuations may be playing a role as well. Nearly everyone hired into tech over the past two years sees way lower unvested values in their E*Trade accounts today. Right now RSUs just don’t have the same luster as Benjamin Franklins.
Remote work could also explain a rise in knowledge worker signing bonuses. With on-site benefits like free lunch and pickleball courts going unused, perhaps it’s harder to differentiate perks. Which is easier to explain: extra rest-and-recharge holidays, or a $15,000 direct deposit?
So will the trend continue?
In a recession, I think so, assuming the job market remains tight.
Maybe cash is king after all.
Subtle downsides
In a couple weeks, I’ll share my thinking on the true costs of signing bonuses, from cost leakage to implications for pay transparency.
PS, welcome to Peer Group
If you’re new here, welcome! I started this weekly newsletter for compensation leaders navigating the new era of pay transparency.
Last week was my first post, which you can read here:
I polled readers about what I should write next, and the top vote-getter was growing sign-on bonuses. If you find data like this helpful, I often include polls so we can learn from each other. Note — you can check back for final results, polls always close in a week.
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