Bonus discussion

[Jaska]

Hi all,

Somewhat strange situation at a company I used to work at, trying to see if I can help them out. Have simplified below to make it easier to read

Aaron joins company A in 2012. He has a generous bonus scheme (Contractual but loosely defined) and enjoys payouts of 10%+ for 4 years

Company A merges with company B, and TUPE applies to the whole office. 2016 bonus is kept with the old targets and systems and a payout of 10%+ occurs

2017 bonus is now under company B rules and pays out 0% as all targets are 'missed'

Is this simply just unethical behaviour and all the Aarons are screwed and should look elsewhere?

[edc]

Jaska said:

Hi all,

Somewhat strange situation at a company I used to work at, trying to see if I can help them out. Have simplified below to make it easier to read

Aaron joins company A in 2012. He has a generous bonus scheme (Contractual but loosely defined) and enjoys payouts of 10%+ for 4 years

Company A merges with company B, and TUPE applies to the whole office. 2016 bonus is kept with the old targets and systems and a payout of 10%+ occurs

2017 bonus is now under company B rules and pays out 0% as all targets are 'missed'

Is this simply just unethical behaviour and all the Aarons are screwed and should look elsewhere?

In what way is the bonus contractual? How is it referenced in the employment contract?

There may well be a contractual entitlement to be part of a bonus scheme but I bet it does not make any commitments to payout.

Most are constructed to give the company flexibility to set the thresholds and targets.

[Jaska]

Contract reads 'bonus is paid yearly, 10% paid at target, bonus range 0-15%'

[edc]

Jaska said:

Contract reads 'bonus is paid yearly, 10% paid at target, bonus range 0-15%'

So who defines the target? How is it measured? How does the individual track achievement against target?

From the above though it's clear the target is not fixed (as you'd expect) nor tied to a specific metric or metrics.

[Jaska]

I totally agree with you, it was previously defined by company revenue and profit, and still is now. A 'bonus committee' decides the targets. Just seems the goalposts have moved from easily achievable to unachievable as now company B are deciding the target is much higher. (company B bonuses are historically in the range of 0-2%)

Edit - to clarify what I'm originally asking, is there any reason to suggest that previous bonus payouts under company A should affect bonus payouts at company B, if the targets are not contractually defined?

[Jefferson Steelflex]

NO. The TUPE arrangements are a red herring, in this case Aaron has kept the same bonus T&Cs as before, all that has changed is the targets against which the bonus was paid.

It's a classic mistake people make with bonus, just assuming past performance indicates future payouts. Getting 0% is harsh, but likewise assuming/budgeting to continually receive 100% is naive.

[0000]

I'm a bit confused.

Is it that the targets for a year in advance are set beyond what the Aarons are capable of achieving, or that during the relevant year the target set at the start of the year has changed?

[berlintaxi]

Jaska said:

2017 bonus is now under company B rules and pays out 0% as all targets are 'missed'

Maybe I am being dense but surely the fact that all targets were missed would indicate that no bonus is payable, I think you friend need to look up the definition of bonus.

[Jaska]

Thanks all, good feedback and along the lines with what I thought. As you say simply harsh but not out of line with what they can do. I am glad I left the place when I did!

[Jaska]

0000 said:

I'm a bit confused.

Is it that the targets for a year in advance are set beyond what the Aarons are capable of achieving, or that during the relevant year the target set at the start of the year has changed?

Just to give additional info here as this is somewhat relevant, it's actually neither! They didn't tell the staff the target, then at the end of the year told all staff the targets have not been reached and no bonus was payable. They have not disclosed the target revenue, or the actual achieved revenue. Just have to take it at face value that the board of directors are giving the right information.

[0000]

Oh. Yeah, always get your bonus targets set at the start of the year.

Even then though, I've seen a few companies pull bonuses. And good staff move on as a result.