Sign-On bonus a well formulated package to contain attrition and to bind newly recruited employees to the firm. It started way back in 90’s but was prevalent only to top management positions like CEO, CTO and more of the C groups.All this has changed, and with more jobs and lot of talent crunch, the sign-on binuses have percolated to even entry lateral entry levels. Few figures are amazing, like India Infoline has paid 11 crore each to Bharat Parajia, H Nemkumar, Aniruddha Dange and Vasudeb Jagannath, who were roped in from CLSA. Phew! Lehmann Brothers anchored 4 hot-shots in business head categories and have buttered them with Rs. 3-4 crore as sign on bonus each.Sign-on bonuses have become essential for any LOB start-up of a bigger company or when there is an expansion.

On drilling a bit typically there are three modes of sign-on bonuses:
1. Upfront cash payment, which comes with the first salary and maximum by 2nd month salary.
2. Deferred payouts, much like the way Reliance started, 50-25-25. In this the money is paid maybe annually but with 50-25-25 ratio quarter wise. It is very popular among IT companies, when the amount is very high.
3. Big ticket perquisites.

The things to look for when finalising the deal of sign-on bonus:
1. Sign-on bonus comes with a guarantee period, failing which the entire amount should be returned to the company.The basic gurantee/bond is for one year, but it depends on the amount paid. You always get the amuit, after tax cuts so it is always less, which makes you at loss. But if in any circumstance you have to pay back, then it is in full, and you are at loss. Again if you pay the amount which you received after tax cut, company is at loss. These things should be clarified during salary negotiations.

2. Payback can again be decided as either the entire amount or on pro-rata basis depending on the remaining months to minimum stipulated time.You should not accept sign-on bonus blindly, as of course money makes people blind.Always clarify the payback factor. I don’t think it is justified to pay organisation, entire amount when you are quitting on the 360th day, and your bond is of 1 year.

3.People in require of immediate financial requirement like home loans, or any emergency fund go for huge sign-on bonuses.It can be that the sign-on bonus is adjusted against the EMI for home-loan. Matters can get complicated here, so instead have a contingency fund which you have saved for 3 – 4months rather than going for unplanned decisions. It is always good for companies, as complicated matters are good to check attrition.

Sign-on bonuses are tools to ensure, that the critical hires come to the board and organisation can reap benefit out of their knowledge. So next time, clarify all your doubts before going for the fat, plump sign-on bonus.