The Stay-or-Pay Clawback Worksheet, Priced to What You Owe at Each Exit

Your offer letter has a line that says if you leave within some window, you pay the signing bonus or relocation money back. This guide is for anyone holding or expecting such an offer who wants to know the real number - gross and net - before they sign. I carry one real clause through three exit dates, run the enforceability check end to end, and hand you the redlines to send back.

Most pages on clawbacks explain the concept and stop. They do not compute the dollar math, they skip the gross-versus-net tax trap, and they ignore the new California enforceability conditions. Here I do all three on a worked example you can follow on your own case.

What is a stay-or-pay clause, exactly?

A stay-or-pay clause is a contract term that requires you to repay a signing bonus, relocation payment, or training cost if you leave before a specified period ends. It is also called a clawback or a repayment agreement. The whole thing turns on four variables: the schedule, the trigger list, the carve-outs, and the tax year.

Get those four right and the number falls out. Get any one wrong and you misprice your exposure by thousands.

• Schedule - how the obligation shrinks over time (or does not).
• Triggers - which exit events start repayment.
• Carve-outs - which exit events excuse it.
• Tax year - whether you repay net or gross, which decides the cash you actually part with.

The clause lives in your offer letter, in a separate repayment agreement, or in a relocation addendum. Find all of them. In Refolk's index of professional profiles, US healthcare practitioners - physician, registered nurse, and travel nurse titles - number 760,603, and that sector is where these clauses are most prevalent. If you are a nurse or a physician, assume you have one until you have read every page.

The three schedule archetypes you will actually see

Filed agreements use one of three schedules. Name yours first, because the schedule decides whether timing your exit is worth more than negotiating the number.

Cliff (all-or-nothing). You owe 100% until a hard date, then nothing. AMD's sign-on bonus requires repayment of 100% of the bonus if termination is less than 12 full months after hire, and the obligation is not reduced by completion of partial months. This creates a one-day swing worth the entire bonus: leave on day 364 and you owe everything; day 366 and you owe nothing.

Declining monthly forgiveness. The obligation shrinks by a fixed fraction each completed month. A CPS relocation agreement reduces the repayment by 1/12th per completed month across a 12-month window. A clean, negotiable version is: repayment equals base bonus multiplied by remaining months divided by total months.

Delayed cliff then decline. Full repayment through an early cliff, then monthly forgiveness after it. Spansion required 100% if termination is within 12 months, and after 12 but before 24 full months the full amount less 8.33% for each full month completed after the twelfth, with no proration for a partial month.

Here is what real filings look like side by side.

Windows cluster at 12 and 24 months. Cisco used a two-year window with prorated monthly repayment for voluntary termination. A representative signing-bonus clause required 100% repayment within 12 months, 50% between 12 and 24 months, and nothing if terminated without cause. Relocation spend is larger than the cash you saw: companies typically spend $20,000 to $100,000 relocating a professional employee, and WEX's agreement covers household moving, allowances, visa costs, and relocation and tax provider fees.

What you owe at each exit, on one $24,000 bonus

Take a $24,000 bonus and run all three schedules against three exit dates. This is the table that tells you whether to negotiate the schedule or just time your exit. The figures below are derived by applying each filed formula to a $24,000 base; they are illustrative, not from a single source.

Read the first column. Under the cliff, month 6 and month 12 are the same contract, but the exposure goes from the full $24,000 to zero across a single day. Under monthly forgiveness, the number falls smoothly - every month you stay is worth $1,000 of forgiveness. The delayed cliff is the worst of both: you carry the full amount for a full year, then it declines.

The practical read: on a cliff, do not negotiate the dollar figure, negotiate the date, or plan your exit around it. On monthly forgiveness, the schedule is already fair, so spend your negotiating capital on the carve-outs and the net-of-tax point below.

Gross or net: the trap that moves the number most

The single biggest error is paying gross when you could have paid net. Whether you owe gross or net is decided by one fact: the tax year.

Same year. If you repay within the same calendar year the bonus was paid, the employer reverses the payroll entries and adjusts your W-2, so you typically owe only the net amount you actually received. The taxes get unwound.

Cross year. If the bonus was paid in a prior tax year, the employer has closed the W-2 and remitted the taxes, and will almost always demand the gross amount. You then recover the withheld federal income tax yourself, later, through IRC Section 1341.

Signing bonuses are supplemental wages, so federal income tax is commonly withheld at the flat 22% rate, and FICA runs at 7.65%. Here is the cash reality on a $24,000 bonus, federal only. These lines are derived and illustrative; state income tax is excluded.

The gross-net gap is really a float, not a loss. On a cross-year exit you front the withheld tax and recover it only later. The cost is the time value of money, which is exactly why a same-year exit is cheaper than a cross-year one even when the stated gross is identical.

The Section 1341 recovery, step by step

Section 1341, the claim-of-right rule, lets you recover tax on income you had to repay. The IRS mechanism: if the amount repaid was more than $3,000, you can deduct it as an other itemized deduction on Schedule A line 16 if you included the income under a claim of right, or you can choose a credit for the year of repayment. The IRS directs you to figure your tax under both methods and compare the results.

The deduction helps only if your total itemized deductions exceed your standard deduction. If they do not, the credit method is the one that returns money. Run both.

The gross-net gap is not a loss, it is a float - which is why a same-year exit is cheaper than a cross-year one.

Does a layoff void it? Read your own trigger list

Whether a layoff voids repayment depends on the wording of your agreement, not any general rule. Some agreements require repayment whenever employment ends within the window, whatever the reason. Others require it only on resignation or for-cause termination. Others expressly excuse repayment when the employer eliminates the role.

The filed examples split cleanly. WEX's agreement triggers repayment on voluntary resignation or for-cause termination within 24 months, but not if employment ends due to death, disability, or reduction in force. AMD forgives repayment on a company- or department-wide reduction in force, a termination other than for cause, or death or disability. A CPS relocation agreement states the repayment obligation does not apply if employment is terminated by the company without cause, such as a layoff or restructuring.

But protection is never implied. Physician-contract guidance warns that repayment may have no protection when the employer restructures, changes the role, or closes a location, unless the contract states the exception expressly. If your clause does not name layoff or without-cause as a carve-out, assume a layoff still triggers repayment.

The California AB 692 enforceability check

If you are a California worker and your agreement was entered into on or after January 1, 2026, AB 692 may void the clause entirely. It was signed by Governor Newsom on October 13, 2025, is codified as Section 16608 of the Business and Professions Code and Section 926 of the Labor Code, and prohibits most stay-or-pay provisions requiring repayment of training costs, sign-on bonuses, relocation expenses, or other costs if the worker leaves before a specified period.

It is not retroactive. It applies only to agreements entered into on or after January 1, 2026; clauses in earlier contracts are generally still enforceable. So the first question is always the signing date.

For a discretionary sign-on or relocation payment to remain enforceable under AB 692, all six of these must be met:

1. The repayment agreement is separate from the main employment contract.
2. You received written notice of the right to consult an attorney and at least 5 business days to do so.
3. Repayment is prorated on the time remaining.
4. The retention period is no more than 2 years from when the bonus is paid.
5. There is no interest.
6. You have the option to defer receiving the bonus until the end of the period, and repayment is triggered only if separation is at your sole discretion or due to misconduct, not if the employer terminates you without cause.

Miss any one and the provision is prohibited. Violations expose employers to actual damages or a penalty of $5,000 per worker, whichever is greater, plus injunctive relief and attorneys' fees.

The defer-the-bonus option quietly kills most clawbacks. Because a compliant clause must let you defer receipt to the end of the retention period with no repayment obligation, a California candidate can elect to take the money at the end and carry zero exposure for the whole window.

Once you have named your schedule and listed your carve-outs, you may want to see which California compensation teams actually draft these clauses, so you know whose template you are up against.

The procedure: from clause to net number

Run these seven steps in order on your own offer. Steps 1 through 4 you can do alone in under an hour; step 5 is worth a CPA's time, and steps 6 and 7 are the negotiation.

A worked example carried through

Say your offer is a $24,000 sign-on bonus, paid in November, on an AMD-style 12-month cliff with a RIF carve-out, and you signed in a prior year so AB 692 does not apply. Run the steps.

• Schedule: cliff, 12 months, no partial-month credit.
• Triggers and carve-outs: repayment on voluntary resignation or for-cause; forgiven on reduction in force.
• Gross at three dates: month 6 = $24,000; month 11 = $24,000; month 13 = $0.
• Tax year: you took the bonus in November. If you resign the following March at month 5, that is a cross-year repayment - you owe the full gross $24,000 and must recover about $5,280 of federal tax through Section 1341 later. If instead you had resigned that December, same year, you would owe roughly the $16,884 net.

The wrong turn here is obvious once you see it: resigning in March instead of December turned a roughly $16,884 net obligation into a $24,000 gross outlay plus a recovery you have to chase. Same clause, same month count, different tax year. Time the exit to the calendar year, not just past the cliff.

How this goes wrong: the seven failure modes

Each of these costs real money or real time. Check yourself against the list before you sign or before you wire a repayment.

• Assuming a layoff voids repayment. You read "without cause" protection in one blog and assume it covers you. Some agreements require repayment whenever employment ends in the window, whatever the reason. Check your own trigger list, not an example.
• Treating AB 692 as retroactive relief. A pre-2026 California clause is not voided. If you signed before 2026, the old rules apply and the clause may still be enforceable. Check the signing date.
• Paying gross in a year you could have paid net. Before you wire a gross figure, confirm whether the repayment and the bonus fall in the same W-2 year. Same year usually means you owe only the net.
• Expecting an automatic tax refund. Section 1341 is not automatic. Repaying $20,000 when only about $14,000 reached your account means you are out the withheld tax until you recover it, and recovering it takes a filing.
• Choosing the Section 1341 deduction when it yields nothing. The itemized deduction helps only if your total itemized deductions exceed your standard deduction. Otherwise use the credit method. Figure both.
• Missing hidden relocation cost. Direct-billed movers and visa or tax-vendor fees inflate the owed figure. WEX's agreement covers household moving, allowances, visa costs, and relocation and tax provider fees, not just the cash you saw.
• Trusting "prorated" without reading the partial-month rule. Spansion gives no proration for a partial month, so leaving mid-month can owe you a whole extra month. Read the exact words.

Redlines to request before you sign

If you are going to change terms, these are the five that move your exposure the most. Send them as a short numbered list; they are standard enough that most employers have seen each one.

1. Proration: replace the cliff with monthly forgiveness - obligation reduced by 1/[window in months] for each completed month of service.
2. Net-of-tax: cap any repayment at the net amount I actually received, or require the company to process repayment so withheld taxes are reversed.
3. Without-cause carve-out: no repayment is owed if the company terminates my employment without cause, including layoff, reduction in force, or role elimination, or on death or disability.
4. Partial-month credit: proration applies to partial months, not only full months completed.
5. Payment plan and no wage deduction: any owed amount is payable over [n] months, and I do not authorize deduction from final wages or other sums owed to me.

Before you call the job done, verify each of these against your actual document.

Keeping this current

Two things in this guide move over time, and you should re-check the mechanism rather than trust a remembered number. The AB 692 conditions and penalty are set by statute; confirm the current text through the Legislative Counsel's public listing for the 2025-2026 session before relying on the six-condition test, and watch for other states adopting similar bans. The tax treatment runs through IRS Publication 525's Repayments section and the $3,000 Section 1341 threshold; verify both in the current year's publication before you file.

Everything else - the schedule math, the gross-net logic, the carve-out reading - is evergreen. The clause in front of you is a contract, and the number it produces is arithmetic once you have named its four variables. Do the arithmetic before you sign, not after you resign. Refolk can tailor your materials and score your fit on the next role, but the one piece of math no tool should do for you is the number you owe to walk away from this one.