Negotiating Sign-on Bonuses
I get asked a lot about the "business" side of being a game artist, so I thought I would start condensing my brain dumps into short articles. Awhile ago I did a quick blurb in a Discord group about negotiating signon bonuses during interviews. I wanted to take it a step further and make it available to more people.
I'm happy to answer any questions and certainly open to feedback. Thanks!
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What is a Sign-On Bonus?
Quite simply, a sign-on bonus is a sum of money offered to a prospective candidate in order to get them join. It is quite common in other industries but rarely seen in the games industry unless it is at the executive level. Unfortunately, conversations centered around artist employment usually stops at base compensation, quite literally leaving money on the table.
Why Ask for a Sign-On Bonus?
There are many reasons to ask for a sign-on bonus. In my experience, it’s been to compensate for some delta between how much I need vs. how much the company is offering.
For example, a company has offered a candidate a position paying $50k/year. However, research indicates that the candidate requires $60k/year in order to keep in line with their personal financial requirements and long-term goals. Instead of turning down the offer wholesale, they may ask for a $10k sign on bonus with actionable terms to partially bridge the gap.
Whatever the reason may be, the ask needs to be reasonable. Would you like a $100k signon bonus? Of course! Should you ask for it? Probably not. A sign-on bonus is a tool to reduce risk, not a tool to help you buy a shiny new sports car.
Aspects to Consider
Before one goes and asks for a huge sum of money, there are some aspects of sign-on bonus negotiations the candidate needs to keep in mind.
- The more experience you have, the more leverage you have to negotiate.
- You must have confidence in your role as an employee within the company.
- You must have done your research ahead of time. This includes knowing your financial goals and how the prospective offer changes, influences, or diminishes them.
To the first point, the more experience one has, the better. If the candidate is a junior employee (roughly defined as less than 3 years of industry experience) or looking for their first job in the industry, it’s highly unlikely that a company will entertain a conversation about sign-on bonuses. Getting into the industry is highly competitive and there is likely very little motivation for a company to pay a sign-on bonus for one candidate when there a dozens (or hundreds in some cases) of other candidates that will jump at the first offer.
Additionally, the candidate must have confidence in succeeding at the desired role in the company. They have to know that they can handle the day to day responsibilities as well as any extra demands that may come up during production. The company needs to be convinced of their ability to be a team player and, as a result, is willing to put a little extra money down to hire them. In other words, the candidate needs to reduce the company’s risk in hiring them enough that an extra payment or two is negligible.
And finally, they must know where they sit financially and where they want to be in the short-, mid-, and long-term. Having this information at hand is essential to the negotiation process.
The Role Risk Plays in Employment
The interviewing process is a tricky one for all parties involved and it revolves around the idea of risk. Is this candidate low-risk or high-risk? The risk level depends on a number of factors: portfolio quality, experience, soft skills, etc. Were you late for the interview? Your risk to the company just went up. Did you bring additional portfolio materials that were not online? Your risk just went down and you became more hireable.
If a candidate has an offer in hand, then the company sees enough potential to get a return on their investment with as little risk as possible. At this point, the company is confident in their ability as an employee (ie. low risk) and they are willing to give them money in return for that ability.
Asking for the Sign-On Bonus
So what now? The candidate has gone through the interview process, the company has offered them a position and base compensation. Unfortunately, the offer falls below expectations. Here is where the knowledge and research of the position and personal financial goals comes in. The candidate has to know what their thresholds and limits are. If they ask for $60k/year and the company is offering $50k, how do you ask for the bonus? Once again, it comes down to risk.
Here is the point to remember: risk is not one-sided. The candidate takes on risk by changing companies as well. The candidate has to leverage the sign-on bonus as a way to reduce risk for both parties. Here is the important part:
A sign-on bonus reduces the company’s risk because they are not commiting to an increased salary and bonus payouts can be staggered and have terms attached to them. The sign-on bonus reduces the candidate’s risk because it bridges the gap between the offered compensation and their personal financial requirements.
If the sign-on bonus is reasonable and the company has the finances (explained further down below), it is a win-win for both parties and hopefully the beginning a profitable business relationship.
A Bit about Finances
First off, I am not a business accountant nor have I managed finances for a business. I am sure that it is much more complicated than my example below and there are a lot of considerations to take into account. In my experience, however, I do know that base compensation (ie. salary) will generally fall into a different line item category on the financial books than a bonus payout. When companies determine how many open spots they have, it is usually done by department with inter-departmental salary caps.
For a simplified example, an environment department’s total salary cap is $500k/year. They have 9 artists being paid $50k/year, leaving $50k/year remaining for the 10th member of the team. Remember the example I gave earlier asking for $60k/year? The company cannot offer that salary because it breaks the departmental cap. However, since bonuses typically do not affect departmental caps, the company can pull from a different pool of money without increasing their risk by committing to a higher salary.
Sweetening the Deal
Coming right out of the gate and asking for an upfront payment might be too aggressive of a play (ie. high risk for the company). One way around this is to attach terms to the bonus. What does this mean? Take the situation above. A candidate has an offer for $50k/year but would like a bit more. If through the course of discussing compensation they get the sense that $10k is too high, they can offer to break up the payments based on terms.
For example, a counterpoint to the initial base compensation offer could look like this:
- $50k/year salary
- $5k bonus payout #1 after 30 days of successful employment
- $5k bonus payout #2 after 365 days (or any length of time) of successful employment
In this example, the candidate is guaranteed $55k/year salary for 2 years. If they factor in a standard 3% cost of living raise, the first 3 years of employment looks like this:
- Year 0-1 = $55,000 ($50,000 + $5,000 payout #1)
- Year 1-2 = $56,500 (($50,000 x 1.03%) + $5,000 payout #2)
- Year 2-3 = $53,045 ($51,500 x 1.03%)
Now it might not be the $60k/year they had in mind but it is a great compromise to keep both parties comfortable.
If the Company Says Yes
Great news! The company said yes! What now? Personally, I always request at least a full 24 hours to crunch the final numbers. In the past, I’ve requested up to a week for full consideration. Even if you know you will say yes, doing due diligence with your finances one last time is always a good practice. Plug the numbers into a spreadsheet, look at your bills and expenses again, and review the whole offer (base compensation, bonus, time off/sick leave, medical/dental/vision, etc.). Discuss the offer with your significant other as well. You will see the offer in a different light when you wake up, so make sure you are not rushing into a situation you will regret.
If the Company Say No
If the company says no, then you have a difficult decision to make. Request time to review the offer and crunch the numbers. If it is a lateral move (same position, different company) then you have to ask if the switch is worth it. Only due diligence will offer that insight and you have to give yourself enough time to let those insights arrive. You might find yourself accepting the new position due to other non-financial reasons (which could be a whole separate article!).
Conclusion/Final Thoughts
When it comes to negotiating during the interview process, it is very easy to take what you can get and run. You might fear that in asking for more, you will be disqualifying yourself from the position. Keep in mind that the offer has already been extended to you and a company will not rescind their offer simply because you came back with a counterpoint. Negotiations are expected at this stage and by putting forth a creative compromise, your first impression is that of someone who conducts themselves in a professional manner.
Also keep in mind that negotiations do not always go well. There are countless factors that influence whether or not someone gets a sign-on bonus. Sometimes it all comes down to being there at the right time at the right place. Just make sure you do your due diligence and be ready when the opportunity presents itself.
Thanks for reading!
Replies
I only ask this because what if you do sign on for a bonus but later in your career that money gets withheld (i.e potential closure, poor management or literally a grudge).
Anything could happen over the term of employment. I've had studios attach additional terms to a sign-on bonus (not payable if I leave, etc) but have never had an issue where I didn't get the full bonus. That being said, finances run dry and studios run into a complications. If that happens, it's up to you decide to take legal action (hint: probably not worth the hassle) or just move on gracefully.