Signing Bonuses: Indentured Servitude of the Engineering World
James Carr explains how some tech companies are using signing bonuses to trap developers in jobs and why it's important to read the fine print on contracts.
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Recently I was having lunch with several friends, two of whom worked for the same Fortune 500 company. These two were discussing a lot of negative situations at their current company and I asked the obvious question: “Why don’t you just leave?” Right now, in my opinion, it is definitely a software engineer’s market. Offhand, I know of at least a dozen companies with the number of open positions in the double digits that they’re desperately seeking to fill. And while I know this is anecdotal, my inbox gets a ridiculous amount of emails per day from recruiters who aren’t just asking me if I’d be interested, they’re practically begging me to please forward them resumes of anyone I know who might be a good fit. So with such booming opportunities, why put up with crappy behavior of an employer?
The answers I got were interesting. While one guy had the common excuse I see where they believe their employer, despite being crummy, is the only well-paying opportunity available, the other gentlemen told me something I was rather surprised to hear. When he joined, he was given a $10,000 signing bonus. He happily used this to pay for a bunch of of home improvements, but this wasn’t just free money—it came with some strings attached. I might have the details muddy, but from what I heard the sum had to be returned in full (even including the amount that got taxed out of the original $10,000) if the employee terminates employment with the employer within two years. Basically what it came down to was he had to pay $10,000 to leave and even if someone hadn’t spent the money they still need to scrape up the amount taxed on it in order to leave.
I’ve heard of signing bonuses all the time and a lot of companies offer some pretty sweet stock options to prospective employees with the typical constraints (e.g. they take three years to vest fully), but this is the first time I heard of a signing bonus that has to be returned if the employee doesn’t complete two full years of employment. With so many of the expenses people have from mortgages to car payments to child care, scraping up that amount is no small task and might even be impossible. As with my friend here he’s pretty much stuck with an employer he doesn’t like for the next year because there’s no other option available to him aside from taking out a loan to pay the signing bonus back. That’s no signing bonus…that’s indentured servitude.
The point to really ponder when you’re mulling over several prospective job offers is to understand that anything that is a bonus for signing on is just that—a bonus. Never take a job based on any signing bonus they offer. Stock options are great, but don’t accept them in lieu of the full market value for your abilities. And if any company comes along with a signing bonus of a lump sum be sure you read the fine print. If it comes with a constraint where you must pay it back, run straight for the hills and make sure you let them know that you won’t work for indentured servitude. Don’t sell yourself short! There are tons of software engineering jobs out there, and a ton of them that don’t come with such ridiculous, almost outright vindictive strings attached.
Published at DZone with permission of James Carr, DZone MVB. See the original article here.
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