friend works at OldCo in a setting where bonuses are paid end of March. Bonus is materially large. Likes the job and company plenty.
recruited to start at NewCo in October for new company. No sign on, as NewCo also wants to pay bonuses end of March. Timing not a concern, but…
But NewCo declares that next March, bonus will be 1/4 of OldCo bonus bc only working for one quarter of the year at NewCo. By end of three years, that deficit in Yr1 will be made up and more by some amount.
I told friend that was bananas - few of us take jobs to “get ahead” by starting out in the hole like that.
So, let D1 = Yr 1 deficit.
Let S3 be the Surplus at end of Year 3.
-Do you reject out of hand?
-Is there an amount where S3 is large enough to take the one year hit on comp?
I am not sure what the problem is, I would expect no part of the OldCo bonus and wouldn’t expect more than a Quarter from NewCo. If it is an issue, would negotiate a sign-on to fill the gap. Even if he left OldCo the day after his bonus, would still be a quarter short of the NewCo bonus.
Over the long run it shouldn’t matter much, but not a reason to not take a good job. But if he is happy where he is, why move.
I had an offer once that was intentionally timed so that I could give notice right after bonus day. I still would have been out roughly 3 months’ accrued bonus, but they were willing to relocate me someplace closer to my and my wife’s family.
So, the bonus is not earned for the past year if the person is not employed on March 31?
First off, that sucks. That is partially a loyalty bonus.
And NewCo company has the same policy? Also sucks.
This NewCo had better be worth it to leave a job and OldCo company they like.
Also, whatever bonus they miss out on is tough cookies, to NewCo. And why would NewCo base their bonus off OldCo? Work at NewCo, get NewCo bonus, prorated to the amount of time you work for it. Start working for new company, and you’ll want 3/4 of OldCo bonus to leave OldCo, in some shape or form: higher salary, which will take some number of years to equal; or sign-on bonus right now.
If the move was purely for higher pay, then there would need to be a significant bump given that the friend is happy at the OldCo, in case the NewCo didn’t work out. If it takes until end of year 3 to make up the bonus shortfall with the higher salary that could be significant.
Also, has the salary/promotional opportunities stagnated at OldCo? There may be some room to grow whereas the salary at NewCo might not move at all over the next few years (especially since they’re not inclined to give a sign-on bonus).
It’s a free labor market, not payroll software. The reason OldCo’s bonus matters is because they’re trying to convince this guy to come work there. If they know he’s out $40k bonus in March they may sympathize and be willing to pay him a piece of it as a sign on to help ease the pain.
Yup, and the person can negotiate that amount with the company.
But, the person will be out the WHOLE amount if they skip out before March. So, 100% of that bonus, please.
OK, 75% of OldCo bonus (Q: which one? No one knows next year’s bonus, I assume), since I’ll get a 25% bonus from New Co. there. Done.
I have not switched jobs for money, but have known people who have, and all of them negotiated a sign on bonus to make up for the expected bonus lost.
New hire money is paid from a completely separate pool as the year end bonus, and it’s typically quite large. They have the money, and they have the flexibility to make it happen if they want to. They may not want to, but in that case, I wouldn’t take the job.
Doing a very crude actuarial on this, with only these two static assumptions and no further information:
2024 Bonus, OldCo = 0
2024 Bonus, NewCo = 25% of Regular Annual NewCo Bonus (which is Z x Bonus, OldCo)
If S = “surplus from NewCo after 3 full years vs. staying at OldCo”, then S is approximately 0 when
Z = 1.5
Average Bonus Increase = 10% [for both companies]
TVM = 6%
On the other hand, if
Average Bonus Increase = 5% [for both companies]
TVM = 5%
then Z = 1.30 yields S to be slightly positive
Now … if Bonus, NewCo = Bonus, OldCo [e.g., Z = 1] then I’m wondering how after 3 years, S is positive.
Short: more information is needed to fully answer the question.
Also need X in the following equation: NewCO Salary = X * OldCo Salary
Cuz then NewCo’s bonuses will based on a higher salary (If X > 1), making all of the work more complicated except on a spreadsheet, which is the obvious tool for this kind of comparison.
Correct. Leave before payout 03/31/YYYY and no bonus for CY:YYYY-1.
as @NerdAlert noted w some references to other job-hopping people, I told friend that when I was offered prior jobs (a handful or more), all recruiting companies offered some guaranteed bonus (immediate as sign on, or delayed to be timed with the rest of the bonus issuing season) that made one whole for, say, prior year’s bonus level. Of course, NewCo does not know what OldCo would pay in the future and neither does recruited employee so assume it matches prior year based on how things are going and guesswork. @NormalDan gets the idea in their post too.
@PatientZombie - assume the percent of salary is 40% for sake of exercise.
Last actuarial job I had, I left like six weeks before they paid out the bonus. I could’ve easily stayed on the six weeks, but it was worth the loss. Don’t regret it a bit.
Fretting over a relatively few dollars is a young, unseasoned person’s dilemma. Pick the job that you’ll be happiest in. If money makes you happy, pick the job that pays more in the long run.
If you are of a substantial level & title, New Co should recognize that potential new hire is walking away from 3 months accrued bonus, and they should pay the difference that friend is walking away from, either at start or a promise to pay full bonus next march. If they wont pay, they don’t really want friend. Friend should stay at OldCo.
The heftiness depends on the company, etc. My company likes to cheap out on base salary at manager level and above, but my median bonus runs around 40%.
Generally, we don’t see too many manager/director/… - level people leave except right after bonus day.
