A construction sign-on bonus that replaces a forfeited year-end or project bonus is usually the cheapest line in the offer. Size it to the documented amount the finalist would lose, tie it to a written repayment agreement, and compare it with the cost of the seat staying open until that bonus pays.
The cheapest part of a senior construction offer is the part contractors most often refuse to pay. Base salary recurs every year. The sign-on bonus that covers what your finalist forfeits by resigning in October is paid once, and it is the line that gets struck on principle, on the view that a company should not pay people for a bonus they earned somewhere else.
The principle is reasonable. It is also expensive, and the expense arrives so gradually that nobody books it.
What is a construction sign-on bonus actually buying?
A start date. The payment replaces money the finalist has already earned and would forfeit by resigning before it is paid, so that the decision to move is not also a decision to take a five-figure loss. You are buying the months between now and their employer’s bonus date.
Two different payments share the name. An inducement is extra money meant to tip a decision. A make-whole reimburses a specific, provable forfeiture. This post is concerned with the second, which is easier to defend internally because it has a ceiling: the amount lost.
Construction pay structures make that forfeiture large and oddly timed. A year-end bonus at a Houston industrial contractor may be declared in December and paid in March, after the audit. A project bonus at a Charlotte multifamily builder may be paid at closeout, which means whenever the punch list says so. The person you want is always some months short of a payment. There is no clean month to leave, and the candidate’s own version of that arithmetic is laid out in our piece on the year-end bonus.
How do you size a sign-on bonus against a forfeited bonus?
Match the documented loss, gross for gross, and no more. Ask for the bonus plan or last year’s statement, confirm the payment date and the forfeiture condition, discount anything discretionary or not yet earned, and put the resulting figure in the offer letter as its own line.
- Get the document. The plan, the award letter, or last year’s pay stub. A finalist who can produce none of them is estimating, and you are entitled to estimate lower.
- Separate earned from hoped-for. A contractual bonus on closed jobs is a loss. A discretionary pool that “usually pays well” is a forecast.
- Check the forfeiture trigger. Some plans pay a departed employee pro rata. Many require employment on the payment date. Only the second is a forfeiture.
- Compare gross to gross. The IRS treats a signing bonus as supplemental wages, the same as the bonus it replaces. Publication 15 lets an employer withhold a flat 22 percent on supplemental wages up to $1 million, so the deposit looks smaller than the letter. That is withholding, not the tax owed, and it is no reason to gross the payment up. Your CPA can confirm the treatment.
- Pay it as a separate line. Folded into base, it recurs, and then compounds into every raise that follows.
Should you move the start date instead of paying?
Only if the bonus date is weeks away and the seat can truly wait. Deferring the start to protect the finalist’s bonus costs nothing on paper, which is why it is popular. The open seat keeps charging you every week, and the counteroffer window stays open the whole time.
Take a worked example. A project executive finalist on a $185,000 base would forfeit a $40,000 year-end bonus by resigning in October, and that bonus pays in March. Refuse the make-whole and the start date moves from November to late March.
Nothing dramatic happens in that quarter, and that is the trouble. The vice president of operations keeps covering three jobs’ worth of owner meetings. One buyout runs late. A change-order position that needed a firm hand in December gets one in April. Suppose the seat carries $30 million of work in progress and a quarter of thin coverage costs half a margin point on it. That is $150,000, and it will never show up on a report, because no report has a line for margin that an absent person would have protected.
Now the other side. A search fee calculated on first-year cash compensation counts a signing bonus, so the make-whole also lifts the search invoice a little. The whole price of saying yes is the $40,000 bonus plus that increment, once.
Those are illustrative figures, not survey data, and you should substitute your own. The shape tends to hold. The forfeited bonus is also rarely the finalist’s only loss: unvested match, deferred pay and a restarted benefits year sit in the same full ledger, and the bonus is simply the line with a date on it. Open leadership seats are also not rare enough to be patient about: the Bureau of Labor Statistics JOLTS program has reported construction job openings across the United States every month for years.
Waiting does make sense when the bonus pays within three or four weeks. Past that, every week between acceptance and start is a week their current employer has to notice, and to respond. A finalist asked to start without the make-whole is being asked to take a pay cut in year one, whatever the base salary shows.
What repayment terms belong with a sign-on bonus?
A written repayment agreement, signed with the offer, that requires the bonus back if the person resigns or is terminated for cause inside a stated period, commonly twelve months and often stepping down over time. Have employment counsel draft it, because state wage law governs how repayment can be collected.
| Term | Common shape | What to check with counsel |
|---|---|---|
| Repayment period | Twelve months, longer for larger sums | Whether the period is reasonable in your state |
| Step-down | Full repayment early, pro rata later | That the arithmetic is written out |
| Triggers | Resignation, or termination for cause | How cause is defined, and that a layoff is excluded |
| Collection | A separate signed promise to repay | Limits on deducting from a final paycheck |
| Tax | Repayment in a later tax year | Gross or net, which is a question for the CPA |
Federal wage rules sit with the Department of Labor’s Wage and Hour Division, and states add wage-payment statutes of their own, some of which restrict deductions from final pay. None of this is legal advice, and state law varies. Many employers put the promise to repay in a signed, stand-alone agreement and not in a clause of the offer letter.
The finalist’s reaction is information. Someone planning to stay does not flinch at a twelve-month term. Expect the current employer to answer with the mirror-image instrument, and read up on stay bonuses before the counteroffer arrives.
How the make-whole counts in a search fee
Whether a signing bonus sits inside the fee base depends on the search agreement, and it should be settled before the offer is drafted. Selah Talent Partners calculates fees on first-year cash compensation: base salary, plus any contractual or target bonus stated in the offer letter, plus any signing bonus. Discretionary bonus, commission, equity, allowances and benefits are excluded.
So a make-whole raises the fee, by the percentage times the payment. Contractors sometimes propose paying it “outside the offer” to keep it off the invoice. The instinct is understandable, and it is the wrong economy: it saves a few thousand dollars and leaves the finalist relying on a promise that appears in no signed document. The wider argument about what belongs in a fee base applies here unchanged. The bonus is one of several search fee terms that move the invoice without moving the percentage.
Price the open quarter before you strike the make-whole from the offer. If the seat cannot be advertised while you negotiate, that is confidential executive search for mandates that cannot be publicly posted, and the search terms should put the fee base in writing first.
Their old bonus costs you once. The empty seat bills weekly, and nobody sends the invoice.
Sources and further reading
- Publication 15, Internal Revenue Service, employer’s tax guide, supplemental wages
- JOLTS program, Bureau of Labor Statistics, job openings and labor turnover
- Wage and Hour Division, US Department of Labor