The Secret Danger in Your Signing Bonus and How It Can Trap You

And why Amazon and Zappos pay you to quit

Writers’ Blokke


Photo by Thought Catalog on Unsplash

This is straight from my “what nobody tells you” archives. There’s a window to more at the end of this article.

One of the most alluring perks for a new hire is the signing bonus — a fat packet of cash you receive soon after starting your new job.

I’m going to share what you want to know before you accept (and spend) it.


Because you may not see its true impact on your freedom and peace of mind.

A signing bonus can be the proverbial bait in the trap.

Whether it gets wisely stashed away into your IRA, 401k or savings account or goes to pay off credit card debt, or purchase a cool treat for yourself, know there are troubling strings attached.

This company-supplied cash infusion is a great ego booster and tastes ever so sweet after the long hard slog of the job hunt.

Here’s how to get the honey and avoid the trap.

In the event that things don’t work out, you want the freedom to leave and a signing bonus is designed to keep you in place, even if you’re unhappy.

The signing bonus does a few things for the company, not all of them immediately apparent to you.

“Money blindness” is a real thing

Lump sums of cash are rare in life. Suddenly things that were out of the question are possible.

The signing bonus may appear to be nothing more than the premium they’re paying for your amazing talent (and who wouldn’t want to believe that?)

You probably are talented, which is why you got the job, but there’s another side of the coin (pardon the pun).

That signing bonus is how the company increases the likelihood you’ll stick around for 18 months to two years, even if it’s the worst job in the world with the most dysfunctional culture imaginable.

Here’s where it bites you.

If you leave within 18 to 24 months (the specific payback term will be dictated in your payback agreement), you have to pay it back.

And if you’ve spent the bonus, you’re faced with stroking a check for many thousands of dollars — this is classic “money-back guarantee” psychology, and it works.

You will not want to give that money back. You may not have it to give back.

Why would they want to keep an unhappy employee?

Companies are evaluated on how long employees stay.

Companies use this cash incentive to keep you in the job long enough to give them better employer turnover statistics, which they use as a public relations angle in the business press.

When you’re being wooed during the interview process, it’s difficult to see what day-to-day life with an employer will be like.

It takes a few months to discover what the company and culture are really like.

Good retention numbers to attract top talent

Experienced candidates see high turnover rates at a company they’re considering and know it suggests trouble under the hood.

It’s expensive to hire people and if you leave, they have to start all over.

Departures are usually bad for morale, too.

Arranging for you to have to buy back your freedom will keep you from bolting if you find things aren’t so rosy once they welcome you inside.

By all means, take the money, but don’t let it trap you.

Companies usually pro-rate the payback over time. The longer you stay, the less you pay. It still stings, especially because of #1 below.

Three ways to protect yourself

First, at a minimum, have the payback reduced to “less taxes.” If you’re taxed 30% on a $10k bonus and leave, you’ll have to pay back the full amount, not the taxed amount. Everyone’s tax obligation is different, but know this money is not tax-free, and the tax burden is on you. (It even has its own line item.)

Next, Negotiate your payback period down or have it removed. Be aware and be defensive, read the contract carefully, and negotiate your repayment down to a shorter time period — if it’s a year, ask for 4 months, for example. Check carefully to see what other strings are attached.

Finally, request half of it be rolled into your annual salary or ask them to let you take all or part of it as a severance package.

Most people don’t read the fine print on their signing bonus contracts until they are faced with repaying it. (You can see one here. )

You’ve got nothing to lose and everything to gain. Everything is negotiable.

This isn’t easy, but take a deep breath and don’t blow the bonus as soon as you get it.

You may need it to buy your freedom sooner than you think. In a study of 1000 workers 31% left in the first year, per BambooHR.

Mismanaged, your signing bonus becomes a pair of time-release handcuffs.

Options to consider, if you find yourself “trapped”

build a case and ask for them to forgive all or part of whatever you owe. All they can do is say, ‘No.’

You can ask your new employer to cover your payback amount as a show of “goodwill” to an incoming employee. You can also ask for an interest-free deferment for 6 months or a year.

If the situation is really grim, don’t hesitate to hire a lawyer to craft your request.

If things get ugly, get help.

Chances are you can spend far less than $1000 to have a labor lawyer assess your situation and send a letter making the request on your behalf. Employers tend to pay more attention when you do.

One client I had requested signing bonus forgiveness because she was bullied and essentially forced out of her job after reporting her verbally abusive boss to HR.

Her initial request for signing bonus forgiveness was denied.

The same request sent via her lawyer was, shall we say, more thoughtfully considered. The letter cost her $250 and the savings was in the thousands.

The signing bonus payback obligation was several thousand dollars.

Time is more valuable than money. Don’t waste yours sticking it out in a job you don’t want because they hooked you on the bonus.

What companies who “get it” do.

Amazon pays employees to leave.

According to Amazon Founder & CEO Jeff Bezos, the idea is “to encourage folks to take a moment and think about what they really want. In the long run, an employee staying somewhere they don’t want to be isn’t healthy for the employee or the company.”

Bezos got the idea from a Zappos policy that offered employees $2000 to leave after the first week if they felt the job was not a fit — 97% stayed!

Enjoy your well-earned bonus, but don’t let it trap you.

Employees get forced out. It’s not pretty, and quite often, it’s not legal. Here’s what you need to know.

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