Definition
Sign-on Bonus
A sign-on (joining) bonus is a one-time payment offered to attract a new employee, often with a clawback clause requiring repayment if you leave within a minimum period.
A sign-on bonus is paid to entice you to join, sometimes to offset benefits you forgo by leaving your previous employer. It is fully taxable as salary in the year received, with TDS deducted.
Most sign-on bonuses carry a clawback condition: if you resign before a stated period (say one or two years), you must repay part or all of it. Repaid amounts can create tax complications, since tax was already deducted on the gross bonus.
Before accepting, read the clawback terms carefully and factor the post-tax value, not the headline figure, into your decision.
Related terms
- Retention BonusA retention bonus is an incentive paid to keep an employee from leaving, typically conditional on staying for a defined period, and is fully taxable as salary.
- Variable PayVariable pay is the part of your compensation linked to performance — individual, team or company — that is not guaranteed and can range from zero to the full target amount.
- Notice Pay RecoveryNotice pay recovery is the amount an employer deducts when an employee leaves without serving the full notice period, effectively buying out the unserved notice.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.