Partner LaKeisha Caton shared her thoughts on job offer payouts upon hire, also known as signing bonuses. The market has seen an increase in the use of signing bonuses in an effort to entice new hires. The lump-sum formula may need a more strategic approach. According to SHRM:
"Employers should consider paying out signing bonuses on a schedule so that the final payment is not made until the employee has been employed for a certain period of time," said LaKeisha Caton, an attorney with Pryor Cashman in New York City.
She noted that signing bonuses may be subject to different tax withholdings than an employee's regular income, depending on how the bonuses are paid. If payment is deferred, the signing bonuses "may be subject to certain additional provisions of the Internal Revenue Code," she said. "Employers should consult with their accountant or a tax professional when making these payments to ensure compliance."
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If payment of the signing bonus on a schedule is not viable and it must be made up front, employers should require employees to pay back some or all of their signing bonuses if they resign before a predetermined date, Caton said.
"Employers that adopt this approach must ensure that the manner in which they recoup some or all of the signing bonus is permissible," she said. In many jurisdictions, it is unlawful for employers to unilaterally deduct the amount of the signing bonus from an employee's paycheck in order to claw back the payment, she cautioned.
Read more insights on signing bonuses from Caton and other experts in the resource links below.
Resources
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