Sign - On Bonus
kerryklimek
1 Post
I am new to this company, but not the HR and I am thrown for a loop on this one...Please HELP!
My current employer offers a "sign-on bonus" instead of a relocation package for employees that are relocating. If employees are local, there is no bonus offer. The owners say there are tax reasons not offering a relocation package. Currently, they have stated in the offer letter that if the employee leaves before their first anniversary, they have to return the bonus. I challenged the owners with the type of leave to which that should apply; voluntary or involuntary. I can potentially see problems if the leave is involuntary, especially when the current offer letters aren't clear on the term "leaves" the company. Has anyone heard of requesting the return of a sign-on bonus?
Thank you!
Kerry Klimek
Comments
Yes, this is common, but usually it is written in an agreement that it has to be returned if for some reason the employee voluntarily leaves. At that point, the employee usually doesn't have enough $ to pay back through payroll (and that can be limited dependent on state wage laws and on the authorization documentation). So the employer would have to take the employee to court to get the $s back. Personally, I have never seen a "payback provision" go well for the employer. By the time the employer pays the attornies/court costs, it is not worth recovering the bonus.
A better way to set it up to the employer's benefit is to have it vested over time. For example a $5000 signon bonus that is paid over 4 quarters or paid 100% at the end of the first year. Of course, I don't think that would be a good recruiting move for those coming from outside the local area.
I do agree that the tax implications of relocation packages can get hairy, especially when you get into accountable and non-accountable plans and gross ups for taxes. So I do understand their reasoning for making it a signon bonus instead.
But honestly, either way, from an employee side, I view this as the cost of the employer doing business.
This is sort of a typical arrangement.
Usually, as HRforME said, it's based on a voluntary separation and it's usually prorated in 3 or 6 month increments in terms of amount owed.