Bonuses from your employer. (1 Viewer)

[msudaisy26]

So can anyone explain to me why companies prefer bonuses over just giving a higher salary without a bonus?

I am in education and every year we get bonuses in August management bonuses are usually between 10 and 15 percent and staff get between 5 and 8 percent.

As someone who does some of the hiring for my company I have tried for years to convince them (unsuccessfully) to get rid of staff bonuses and just give raises based on this and raise starting salary. I have had some very talented candidates turn job offers down because of the low starting salary. I am only allowed to offer up to a certain point and then after that I have to ask for an exemption. I have never been granted this exemption and have been instructed to tell the candidates that most if not all the money they are asking will be made up in bonuses.

This is also a company that has trouble hiring people, every year I am short 2 to 5 people.

What am I missing here?

 

[nysfl2]

Not sure about education, but in industry, companies prefer bonuses because they can be cut back in lean years, when they need to cut expenses

 

[JAA]

Bonuses are not guaranteed and therefore are not a liability and thus can be left off the balance sheet. They are not an obligation of the company.

Same reason companies love "unlimited PTO". Employees are owed nothing.

 

[Bogeys]

More than likely these are discretionary bonuses correct? So if the bottom line is in the negative or doesn't do as well as expected, they aren't required to pay them out. Salary has to be paid unless you get rid of employees.

 

[Dan Lambskin]

in addition to what others said any 401K match and raises are based on your base salary so less they have to pay out there

 

[Runkle]

My bonus is tied to the performance of whatever new thing we're selling, so I guess they don't know what the award is going to be until after doing the accounting of how it sold.

 

[msudaisy26]

in addition to what others said any 401K match and raises are based on your base salary so less they have to pay out there

This is something I didn't think of. Our 401k is very weak on matches and I am sure it could be balanced pretty easily by making raises slightly smaller.

 

[msudaisy26]

Not sure about education, but in industry, companies prefer bonuses because they can be cut back in lean years, when they need to cut expenses

I work for a corporation, that is publicly trade and I don't think they have shown a loss ever.

 

[zamboni]

in addition to what others said any 401K match and raises are based on your base salary so less they have to pay out there

Correct - also the payroll taxes companies have to pay are higher if fixed compensation is higher.

 

[Grahamburn]

So, Education? Cyclical industry. School starts in August, so it's likely your company starts doing significantly better around that time and can afford to pay out bonuses as more revenue comes in. When things slow down at other times in the year they need to be more diligent about managing expenses by not paying out higher salaries to employees.

I assume they won't let you guarantee a bonus in the potential employee's initial contract?

 

[Grahamburn]

Those bonuses are percentage of salary? Not something I'd complain about.

 

[msudaisy26]

Those bonuses are percentage of salary? Not something I'd complain about.

I understand this once someone is working for us, but it makes it extremely difficult to hire people since our salaries are lower because we give out bonuses.

 

[msudaisy26]

So, Education? Cyclical industry. School starts in August, so it's likely your company starts doing significantly better around that time and can afford to pay out bonuses as more revenue comes in. When things slow down at other times in the year they need to be more diligent about managing expenses by not paying out higher salaries to employees.

I assume they won't let you guarantee a bonus in the potential employee's initial contract?

School starts in September and we have count day in October and then receive funding shortly after that. So bonuses are coming a few months before we receive funding and before we know how much funding we are getting.

 

[msudaisy26]

in addition to what others said any 401K match and raises are based on your base salary so less they have to pay out there

Correct - also the payroll taxes companies have to pay are higher if fixed compensation is higher.

This I didn't know and makes a lot of sense.

 

[Grahamburn]

So, Education? Cyclical industry. School starts in August, so it's likely your company starts doing significantly better around that time and can afford to pay out bonuses as more revenue comes in. When things slow down at other times in the year they need to be more diligent about managing expenses by not paying out higher salaries to employees.

I assume they won't let you guarantee a bonus in the potential employee's initial contract?

School starts in September and we have count day in October and then receive funding shortly after that. So bonuses are coming a few months before we receive funding and before we know how much funding we are getting.

Interesting. But, the company won't let you guarantee them when offering a contract to a potential employee?

 

[Grahamburn]

I'm asking because I do this with potential employees specifically for the reasons others have laid out, but I put it in their contracts when they sign on.

 

[Mummy4]

CEO receives $4M bonus but employees receive ZERO.

CEO explains to employees in Zoom call what they need to focus on instead of not receiving a bonus.

...sorry having trouble linking - it's Andi Owen of the company MillerKnoll

https://twitter.com/realscottdodge/status/1648042928994938909

 

[msudaisy26]

So, Education? Cyclical industry. School starts in August, so it's likely your company starts doing significantly better around that time and can afford to pay out bonuses as more revenue comes in. When things slow down at other times in the year they need to be more diligent about managing expenses by not paying out higher salaries to employees.

I assume they won't let you guarantee a bonus in the potential employee's initial contract?

School starts in September and we have count day in October and then receive funding shortly after that. So bonuses are coming a few months before we receive funding and before we know how much funding we are getting.

Interesting. But, the company won't let you guarantee them when offering a contract to a potential employee?

Yes and no. We don't guarantee them, but in the 10 years I have been there I have never heard of a person not getting one.

 

[jobarules]

Because bonuses aren't guaranteed

 

[msudaisy26]

Because bonuses aren't guaranteed

They pretty much are. We even give bonuses to our employees that are leaving at the end of school year as long as they give us a letter of resignation by May 1st.

Thanks for reading the thread.

 

[Alex P Keaton]

So can anyone explain to me why companies prefer bonuses over just giving a higher salary without a bonus?

I am in education and every year we get bonuses in August management bonuses are usually between 10 and 15 percent and staff get between 5 and 8 percent.

As someone who does some of the hiring for my company I have tried for years to convince them (unsuccessfully) to get rid of staff bonuses and just give raises based on this and raise starting salary. I have had some very talented candidates turn job offers down because of the low starting salary. I am only allowed to offer up to a certain point and then after that I have to ask for an exemption. I have never been granted this exemption and have been instructed to tell the candidates that most if not all the money they are asking will be made up in bonuses.

This is also a company that has trouble hiring people, every year I am short 2 to 5 people.

What am I missing here?

Do others in your industry (“competitors”) give any bonus?

 

[Grahamburn]

Because bonuses aren't guaranteed

They pretty much are. We even give bonuses to our employees that are leaving at the end of school year as long as they give us a letter of resignation by May 1st.

Thanks for reading the thread.

Maybe talk to the company about getting more leeway with how the bonuses are paid out or allow you to present them in the contracts. I'll often use sign on bonuses and attach them to X number of years retention or the bonus is refundable.

If they know they're going to pay them anyway it doesn't make sense to not allow you to use it during negotiations to recruit better people.

 

[jobarules]

Because bonuses aren't guaranteed

They pretty much are. We even give bonuses to our employees that are leaving at the end of school year as long as they give us a letter of resignation by May 1st.

Thanks for reading the thread.

They're not. My company has always paid bonuses too but they're not guaranteed like salary.

 

[jobarules]

Also our bonuses fluctuate every year based on company and individual performance

 

[jobarules]

So, Education? Cyclical industry. School starts in August, so it's likely your company starts doing significantly better around that time and can afford to pay out bonuses as more revenue comes in. When things slow down at other times in the year they need to be more diligent about managing expenses by not paying out higher salaries to employees.

I assume they won't let you guarantee a bonus in the potential employee's initial contract?

School starts in September and we have count day in October and then receive funding shortly after that. So bonuses are coming a few months before we receive funding and before we know how much funding we are getting.

Interesting. But, the company won't let you guarantee them when offering a contract to a potential employee?

Yes and no. We don't guarantee them, but in the 10 years I have been there I have never heard of a person not getting one.

Do they vary year by year?

 

[-OZ-]

So, Education? Cyclical industry. School starts in August, so it's likely your company starts doing significantly better around that time and can afford to pay out bonuses as more revenue comes in. When things slow down at other times in the year they need to be more diligent about managing expenses by not paying out higher salaries to employees.

I assume they won't let you guarantee a bonus in the potential employee's initial contract?

School starts in September and we have count day in October and then receive funding shortly after that. So bonuses are coming a few months before we receive funding and before we know how much funding we are getting.

Interesting. But, the company won't let you guarantee them when offering a contract to a potential employee?

Yes and no. We don't guarantee them, but in the 10 years I have been there I have never heard of a person not getting one.

The guarantee is certainly relevant but also future salaries are often based on a percentage increase of that year’s salary. Bonuses don’t get that compounding effect even if they’re a percentage of your salary.

 

[acarey50]

Are these performance bonuses, ie certain metrics need to be met in order for them to be given, even if those metrics are so easy they are all but a guarantee?

Are these more staffing bonuses, ie if you are just on staff as of a certain day, you are getting the bonus? Your previous response about staff getting bonuses even if they are leaving makes it seem like it may be something like this. Regarding that, are you saying that staff that has left at the end of the previous school year still gets a bonus in August, even if they are not returning for the upcoming school year?

For the company I am at, the bonuses are performance based, and the percentage an individual gets is based on their target percentage, which is then modified, up or down, based on the company meeting certain metrics, and then based on individual performance. For some upper level management positions, the salary my not be high compared to other companies, but the bonus potential brings the likely total compensation package to be a bit higher. For most non-management folks, the bonus potential is a nice add-on, though the salary is still closer to industry standards, as the bonus is a smaller piece of the total compensation package.

If you were to factor in the bonus potential, would your salary offerings be competitive with your peers? What is the industry standard as far as having bonuses vs. being strictly salary?

 

[acarey50]

Because bonuses aren't guaranteed

They pretty much are. We even give bonuses to our employees that are leaving at the end of school year as long as they give us a letter of resignation by May 1st.

Thanks for reading the thread.

Maybe talk to the company about getting more leeway with how the bonuses are paid out or allow you to present them in the contracts. I'll often use sign on bonuses and attach them to X number of years retention or the bonus is refundable.

If they know they're going to pay them anyway it doesn't make sense to not allow you to use it during negotiations to recruit better people.

In the OP @msudaisy26 says she does present the bonuses as part of the offer but they are still getting turned down by candidates.

 

[msudaisy26]

So can anyone explain to me why companies prefer bonuses over just giving a higher salary without a bonus?

I am in education and every year we get bonuses in August management bonuses are usually between 10 and 15 percent and staff get between 5 and 8 percent.

As someone who does some of the hiring for my company I have tried for years to convince them (unsuccessfully) to get rid of staff bonuses and just give raises based on this and raise starting salary. I have had some very talented candidates turn job offers down because of the low starting salary. I am only allowed to offer up to a certain point and then after that I have to ask for an exemption. I have never been granted this exemption and have been instructed to tell the candidates that most if not all the money they are asking will be made up in bonuses.

This is also a company that has trouble hiring people, every year I am short 2 to 5 people.

What am I missing here?

Do others in your industry (“competitors”) give any bonus?

Yes, but I can't speak on the size. I do know their starting salaries are slightly higher than ours. Like a 1 to 3 percent.

 

[msudaisy26]

Because bonuses aren't guaranteed

They pretty much are. We even give bonuses to our employees that are leaving at the end of school year as long as they give us a letter of resignation by May 1st.

Thanks for reading the thread.

Maybe talk to the company about getting more leeway with how the bonuses are paid out or allow you to present them in the contracts. I'll often use sign on bonuses and attach them to X number of years retention or the bonus is refundable.

If they know they're going to pay them anyway it doesn't make sense to not allow you to use it during negotiations to recruit better people.

That is an idea, I do tell potential employees about the bonuses and they ask the criteria. I always tell them that I have never had an employee not get a bonus, but I have paid out the lowest bonus and highest bonus before.

 

[msudaisy26]

So, Education? Cyclical industry. School starts in August, so it's likely your company starts doing significantly better around that time and can afford to pay out bonuses as more revenue comes in. When things slow down at other times in the year they need to be more diligent about managing expenses by not paying out higher salaries to employees.

I assume they won't let you guarantee a bonus in the potential employee's initial contract?

School starts in September and we have count day in October and then receive funding shortly after that. So bonuses are coming a few months before we receive funding and before we know how much funding we are getting.

Interesting. But, the company won't let you guarantee them when offering a contract to a potential employee?

Yes and no. We don't guarantee them, but in the 10 years I have been there I have never heard of a person not getting one.

Do they vary year by year?

Yes, from 4 to 8 percent for staff. It is based on performance reviews and I am sure some other criteria that is above my pay grade.

 

[The General]

Not sure about education, but in industry, companies prefer bonuses because they can be cut back in lean years, when they need to cut expenses

I think we can close the thread.

 

[msudaisy26]

Are these performance bonuses, ie certain metrics need to be met in order for them to be given, even if those metrics are so easy they are all but a guarantee?

Are these more staffing bonuses, ie if you are just on staff as of a certain day, you are getting the bonus? Your previous response about staff getting bonuses even if they are leaving makes it seem like it may be something like this. Regarding that, are you saying that staff that has left at the end of the previous school year still gets a bonus in August, even if they are not returning for the upcoming school year?

For the company I am at, the bonuses are performance based, and the percentage an individual gets is based on their target percentage, which is then modified, up or down, based on the company meeting certain metrics, and then based on individual performance. For some upper level management positions, the salary my not be high compared to other companies, but the bonus potential brings the likely total compensation package to be a bit higher. For most non-management folks, the bonus potential is a nice add-on, though the salary is still closer to industry standards, as the bonus is a smaller piece of the total compensation package.

If you were to factor in the bonus potential, would your salary offerings be competitive with your peers? What is the industry standard as far as having bonuses vs. being strictly salary?

Everyone starts at the median bonus and it goes up or down based on performance goals. If they hit none of their goals they are getting the minimum bonus and we will have a meeting about why they didn't hit even the easiest goals.

Yes, people that are leaving our school will get a bonus check August even if they are no longer employed by us. As long as they give us a letter of of resignation by May 1st. They are pretty lax on this policy. I have had several employees that have left after they had been with us for several years that still got their bonuses.

If you add in my bonus my pay is still 10 to 20 percent less than industry standards, but there are a lot of different factors. This is more of an educated guess.

 

[Gally]

Raises are forever (basically). So anytime you get a raise it affects your next raise, etc. So it is an increasing proposition for the company. Basically companies want to save money and giving bonuses over raises does that subtly.

 

[msudaisy26]

Raises are forever (basically). So anytime you get a raise it affects your next raise, etc. So it is an increasing proposition for the company. Basically companies want to save money and giving bonuses over raises does that subtly.

I do agree with that, but I am sure they have people that are good enough with numbers that could figure out how to make it pretty equal. At least I hope they do.

 

[Gawain]

If you hire an employee at 10k a year and have 10% to divide amongst raise and bonus, after 10 years you’ve paid the following:

2% raise 8% bonus: $117,300.91
5% raise 5% bonus: $131,292.21
8% raise 2% bonus: $147,363.14

The compounding of the raise brings wages and costs up much farther and is much less controllable than a bonus structure.

 

[Alex P Keaton]

If you hire an employee at 10k a year and have 10% to divide amongst raise and bonus, after 10 years you’ve paid the following:

2% raise 8% bonus: $117,300.91
5% raise 5% bonus: $131,292.21
8% raise 2% bonus: $147,363.14

The compounding of the raise brings wages and costs up much farther and is much less controllable than a bonus structure.

Well, that’s all good and nice but if your competitors pay raises and you don’t, at some point you won’t be able to recruit or retain staff without competitive total compensation.

 

[Gally]

Well, that’s all good and nice but if your competitors pay raises and you don’t, at some point you won’t be able to recruit or retain staff without competitive total compensation.

I don't think anybody is arguing that. The question is why employers prefer to give bonuses over raises. It's because it costs the company less over time. It's really that simple.

 

[Gally]

I do agree with that, but I am sure they have people that are good enough with numbers that could figure out how to make it pretty equal. At least I hope they do.

They don't want to make it equal. They want to save money over time and give themselves flexibility year to year. Bonus structure does that.

 

[Alex P Keaton]

Well, that’s all good and nice but if your competitors pay raises and you don’t, at some point you won’t be able to recruit or retain staff without competitive total compensation.

I don't think anybody is arguing that. The question is why employers prefer to give bonuses over raises. It's because it costs the company less over time. It's really that simple.

Only if you assume that the world is static and a) employees don’t have options, b) that approach doesn’t impact culture

 

[msudaisy26]

I do agree with that, but I am sure they have people that are good enough with numbers that could figure out how to make it pretty equal. At least I hope they do.

They don't want to make it equal. They want to save money over time and give themselves flexibility year to year. Bonus structure does that.

I mean equal so that the pay raises would be equal to the bonuses over the same time.

 

[jobarules]

So, Education? Cyclical industry. School starts in August, so it's likely your company starts doing significantly better around that time and can afford to pay out bonuses as more revenue comes in. When things slow down at other times in the year they need to be more diligent about managing expenses by not paying out higher salaries to employees.

I assume they won't let you guarantee a bonus in the potential employee's initial contract?

School starts in September and we have count day in October and then receive funding shortly after that. So bonuses are coming a few months before we receive funding and before we know how much funding we are getting.

Interesting. But, the company won't let you guarantee them when offering a contract to a potential employee?

Yes and no. We don't guarantee them, but in the 10 years I have been there I have never heard of a person not getting one.

Do they vary year by year?

Yes, from 4 to 8 percent for staff. It is based on performance reviews and I am sure some other criteria that is above my pay grade.

In other words not guaranteed since it varies and is based on performance

 

[msudaisy26]

So, Education? Cyclical industry. School starts in August, so it's likely your company starts doing significantly better around that time and can afford to pay out bonuses as more revenue comes in. When things slow down at other times in the year they need to be more diligent about managing expenses by not paying out higher salaries to employees.

I assume they won't let you guarantee a bonus in the potential employee's initial contract?

School starts in September and we have count day in October and then receive funding shortly after that. So bonuses are coming a few months before we receive funding and before we know how much funding we are getting.

Interesting. But, the company won't let you guarantee them when offering a contract to a potential employee?

Yes and no. We don't guarantee them, but in the 10 years I have been there I have never heard of a person not getting one.

Do they vary year by year?

Yes, from 4 to 8 percent for staff. It is based on performance reviews and I am sure some other criteria that is above my pay grade.

In other words not guaranteed since it varies and is based on performance

But you are guaranteed to get one.

 

[Grahamburn]

"Guaranteed" with a wink and a handshake and guaranteed in writing in the contract is your sticking point. It means nothing to the potential employee unless it's in writing.

 

[belljr]

Hey, if you want me to take a dump in a box and mark it guaranteed, I will. I got spare time

 

[beer 30]

CEO receives $4M bonus but employees receive ZERO.

CEO explains to employees in Zoom call what they need to focus on instead of not receiving a bonus.

...sorry having trouble linking - it's Andi Owen of the company MillerKnoll

https://twitter.com/realscottdodge/status/1648042928994938909

Saw that one yesterday, predict it will end well for the company.

 

[John123]

I was IT manager for an office of a large fortune 500 company that had annual bonuses. They did layoffs every year right before bonuses were awarded so they didn't have to pay them to those they laid off. They'd send me a list of people with a schedule of when they were meeting with those people to lay them off so I could disable network access while they were meeting. Then one year I was on the list.......

 

[Desert_Power]

"Guaranteed" with a wink and a handshake and guaranteed in writing in the contract is your sticking point. It means nothing to the potential employee unless it's in writing.

Had a job offer last year where they offered me a "guarantee" I would get the bonus as if I were there the full year instead of a sign-on bonus. Nice try.

 

[Gally]

"Guaranteed" with a wink and a handshake and guaranteed in writing in the contract is your sticking point. It means nothing to the potential employee unless it's in writing.

Had a job offer last year where they offered me a "guarantee" I would get the bonus as if I were there the full year instead of a sign-on bonus. Nice try.

Yeah, but did they promise you 5 weeks of vacation after 7 years with the company?