Bonus question
Discussion
The numbers below are made up, but it’ll give the general idea.
Let’s say I have a contract, which says subject to my and the company’s performance, I will be paid a bonus of 10%.
The performance is split 50/50 between the company financial performance, and a rating from a yearly review.
The yearly review scores on a scale of 1-3. 1, and you are likely to be leaving the company, but will certainly be on a performance improvement plan. 3, and you’re likely to be promoted, particularly if you get rated a 3 a few years in a row. 2 is positioned as being a good performer, sometimes going beyond what’s expected, but not doing so consistently enough that you’re a 3.
70% of those rated are expected to be a 2.
Now, to the bonus. If the company hits its numbers then a bonus is triggered, and it’s just down to individual performance. However, being rated a 2 doesn’t trigger 100% bonus payment. Instead, you get 95%, with those being rated a 3 getting 115%.
Here’s the (first world) question - how does performing satisfactorily (e.g. getting a 2 rating), and getting a 9.5% bonus square with the 10% bonus stated in the contract? With this system, there’s no way to be paid the bonus percentage given in the contract - you either get more or less, and most employees are expected to get less.
I’m not planning on challenging this in the current climate, but I’m curious if this is a contractual issue because “normal” performance doesn’t give a full bonus, or whether because bonus amounts and payments are discretionary it’s fine, in which case stating a contractual percentage seems a little pointless?
Obviously, in my view if they expected to pay 9.5% rather than 10% bonus for normal performance, they should set the bonus percentage in the contract at 9.5% rather than 10%, and I’d be fine with that...
Let’s say I have a contract, which says subject to my and the company’s performance, I will be paid a bonus of 10%.
The performance is split 50/50 between the company financial performance, and a rating from a yearly review.
The yearly review scores on a scale of 1-3. 1, and you are likely to be leaving the company, but will certainly be on a performance improvement plan. 3, and you’re likely to be promoted, particularly if you get rated a 3 a few years in a row. 2 is positioned as being a good performer, sometimes going beyond what’s expected, but not doing so consistently enough that you’re a 3.
70% of those rated are expected to be a 2.
Now, to the bonus. If the company hits its numbers then a bonus is triggered, and it’s just down to individual performance. However, being rated a 2 doesn’t trigger 100% bonus payment. Instead, you get 95%, with those being rated a 3 getting 115%.
Here’s the (first world) question - how does performing satisfactorily (e.g. getting a 2 rating), and getting a 9.5% bonus square with the 10% bonus stated in the contract? With this system, there’s no way to be paid the bonus percentage given in the contract - you either get more or less, and most employees are expected to get less.
I’m not planning on challenging this in the current climate, but I’m curious if this is a contractual issue because “normal” performance doesn’t give a full bonus, or whether because bonus amounts and payments are discretionary it’s fine, in which case stating a contractual percentage seems a little pointless?
Obviously, in my view if they expected to pay 9.5% rather than 10% bonus for normal performance, they should set the bonus percentage in the contract at 9.5% rather than 10%, and I’d be fine with that...
Does your contract actually say this 'bonus' is contractual, or does it say that you 'may' be eligible for a performance bonus which 'may' be paid but that there is no obligation to pay it?
With regard to the 10%, it's very hard to guess what the contract says, but I would suspect it will say something like 10% is a bonus potential, but that the actual bonus paid may be less or more than this, or not paid at all.
With regard to the 10%, it's very hard to guess what the contract says, but I would suspect it will say something like 10% is a bonus potential, but that the actual bonus paid may be less or more than this, or not paid at all.
Legal or not, you may risk looking a bit of an idiot/annoyance in raising as an issue if numbers are as your explained IMO.
Getting into a contractural argument over 1/20th of the bonus payment is probably the best way to not get a 3 ranking if you were near that 2/3 barrier and losing 5.5% more!
If the numbers were different it may be worth looking into, but you risk looking a bit of a lemon talking to your manager over this one IMO as it looks like the bonus pool is effectively 10% on average, and it’s a semantic argument about that point.
IMO a better way to handle it would maybe be around raise request at year end. Ask for another 0.5% as mentally you really like to feel like hitting 10%on the year or something (maybe you say inflation is 2.5% but you want 3% due to blah blah Accomplishments, market rate and motivational feeling Of inflation +10% on the year. Then you get the 0.5% every year
A better conversation to have with a manager /HR IMO, it’s more positive - HR and managers are human too. They respond better to constructive ways forwards and positive indications and data rather than moaning / trying to be clever around contracts for 0.5 %
Getting into a contractural argument over 1/20th of the bonus payment is probably the best way to not get a 3 ranking if you were near that 2/3 barrier and losing 5.5% more!
If the numbers were different it may be worth looking into, but you risk looking a bit of a lemon talking to your manager over this one IMO as it looks like the bonus pool is effectively 10% on average, and it’s a semantic argument about that point.
IMO a better way to handle it would maybe be around raise request at year end. Ask for another 0.5% as mentally you really like to feel like hitting 10%on the year or something (maybe you say inflation is 2.5% but you want 3% due to blah blah Accomplishments, market rate and motivational feeling Of inflation +10% on the year. Then you get the 0.5% every year
A better conversation to have with a manager /HR IMO, it’s more positive - HR and managers are human too. They respond better to constructive ways forwards and positive indications and data rather than moaning / trying to be clever around contracts for 0.5 %
The contract has all the usual stuff about the bonus being discretionary, etc. so that it doesn’t have to be paid in the case of either the company or individual not performing. I’m reluctant to publish the clause, because
1. I’d have to go dig it out, and
2. It might, I suppose, identify the company (albeit that this is unlikely).
The 10% bonus number was illustrative, for easy maths. It’s more than 10%...
It’s not worth rocking the boat over 1/20th of the amount, but equally - an expectation has been set, and if in the normal course of events the stated percentage wouldn’t be paid, isn’t the correct thing to change the contracted percentage rather than consistently “under pay” it?
As much as I like my job, and the firm, they do have a track record of being a little “cheap” where they can be. For example, the amount I’m paid is broadly in line with the industry, but it’s made up of salary and cash car allowance - pension and bonus payments are calculated against the base salary rather than total compensation (as you’d expect), but it’s the total compensation that brings the salary in line with the industry.
So, to make up some more numbers for illustrative purposes - bonus would be calculated on £93k rather than £100k due to a £7k car allowance, but the expected pay for the role is £100k.
With a 20% bonus, this would give a bonus of £20k vs. ~£17.6k (20% of 100 vs. 19% of 93), for example.
ETA: I know one way to solve this is to move firms. I’m not so miffed about this that it’s worth doing that.
1. I’d have to go dig it out, and
2. It might, I suppose, identify the company (albeit that this is unlikely).
The 10% bonus number was illustrative, for easy maths. It’s more than 10%...
It’s not worth rocking the boat over 1/20th of the amount, but equally - an expectation has been set, and if in the normal course of events the stated percentage wouldn’t be paid, isn’t the correct thing to change the contracted percentage rather than consistently “under pay” it?
As much as I like my job, and the firm, they do have a track record of being a little “cheap” where they can be. For example, the amount I’m paid is broadly in line with the industry, but it’s made up of salary and cash car allowance - pension and bonus payments are calculated against the base salary rather than total compensation (as you’d expect), but it’s the total compensation that brings the salary in line with the industry.
So, to make up some more numbers for illustrative purposes - bonus would be calculated on £93k rather than £100k due to a £7k car allowance, but the expected pay for the role is £100k.
With a 20% bonus, this would give a bonus of £20k vs. ~£17.6k (20% of 100 vs. 19% of 93), for example.
ETA: I know one way to solve this is to move firms. I’m not so miffed about this that it’s worth doing that.
Edited by DanL on Saturday 23 May 11:48
DanL said:
The contract has all the usual stuff about the bonus being discretionary, etc. so that it doesn’t have to be paid in the case of either the company or individual not performing. I’m reluctant to publish the clause, because
1. I’d have to go dig it out, and
2. It might, I suppose, identify the company (albeit that this is unlikely).
The 10% bonus number was illustrative, for easy maths. It’s more than 10%...
It’s not worth rocking the boat over 1/20th of the amount, but equally - an expectation has been set, and if in the normal course of events the stated percentage wouldn’t be paid, isn’t the correct thing to change the contracted percentage rather than consistently “under pay” it?
As much as I like my job, and the firm, they do have a track record of being a little “cheap” where they can be. For example, the amount I’m paid is broadly in line with the industry, but it’s made up of salary and cash car allowance - pension and bonus payments are calculated against the base salary rather than total compensation (as you’d expect), but it’s the total compensation that brings the salary in line with the industry.
So, to make up some more numbers for illustrative purposes - bonus would be calculated on £93k rather than £100k due to a £7k car allowance, but the expected pay for the role is £100k.
With a 20% bonus, this would give a bonus of £20k vs. ~£17.6k (20% of 100 vs. 19% of 93), for example.
ETA: I know one way to solve this is to move firms. I’m not so miffed about this that it’s worth doing that.
If the bonus is described as discretionary I can't see how you have too much to complain about.1. I’d have to go dig it out, and
2. It might, I suppose, identify the company (albeit that this is unlikely).
The 10% bonus number was illustrative, for easy maths. It’s more than 10%...
It’s not worth rocking the boat over 1/20th of the amount, but equally - an expectation has been set, and if in the normal course of events the stated percentage wouldn’t be paid, isn’t the correct thing to change the contracted percentage rather than consistently “under pay” it?
As much as I like my job, and the firm, they do have a track record of being a little “cheap” where they can be. For example, the amount I’m paid is broadly in line with the industry, but it’s made up of salary and cash car allowance - pension and bonus payments are calculated against the base salary rather than total compensation (as you’d expect), but it’s the total compensation that brings the salary in line with the industry.
So, to make up some more numbers for illustrative purposes - bonus would be calculated on £93k rather than £100k due to a £7k car allowance, but the expected pay for the role is £100k.
With a 20% bonus, this would give a bonus of £20k vs. ~£17.6k (20% of 100 vs. 19% of 93), for example.
ETA: I know one way to solve this is to move firms. I’m not so miffed about this that it’s worth doing that.
Edited by DanL on Saturday 23 May 11:48
Jasandjules said:
What exactly does the bonus clause say?
Two parts to it, and having read both I now have my answer. 
In the contract. some blah then "... your new bonus target percentage is xx% of base salary. This new bonus target will be applied to your annual incentive plan bonus calculation".
In the incentive plan for the people in category 2, we have an individual performance factor of 75% - 105%. So, seems I'm worrying about nothing, and there's a range within the category to cover everyone and pay 100% bonus.
Clearly these rumours that it's 95% for category 2 are just that, and I should have checked before posting.Still, it's filled in some time while locked indoors!
GT03ROB said:
If the bonus is described as discretionary I can't see how you have too much to complain about.
Also fair - I do view it as a bonus (i.e. nice to get) rather than something I'm due. But, when planning to redo the patio it might make the difference between picking a nice stone and a really nice stone. Gassing Station | Jobs & Employment Matters | Top of Page | What's New | My Stuff