How much weight should a bonus carry? 2

[SmithJ]

Hello All,

In making employment decisions, how much weight should a bonus carry? Employers seem to be more willing to offer a higher bonus than to increase the salary of a potential employee.

What are your thoughts on this? Is it better to go for a higher base salary and sacrifice the bonus potential?

Thanks in advance.
JS.

 

[davidbeach]

Bonuses seem to come and go, base salary seems to be more stable. Counting on a bonus is counting your eggs before they hatch.

 

[MintJulep]

Offer a higher bonus, or offer the potential of a high bonus?

Once you have a contract of employment, the employer is pretty much legally bound to pay you your salary.

There is no obligation to give a bonus (unless your contract says that you will get a bonus - with no conditions attached to getting it).

 

[ctopher]

I prefer a raise over a bonus. My last employer thought otherwise, but it didn't keep the employees around long...like me.

Chris
Systems Analyst, I.S.
SolidWorks/PDMWorks 05
AutoCAD 06
ctopher's home site (updated 06-21-05)
FAQ559-1100
FAQ559-716

 

[TheTick]

Get the highest starting base salary that you can. All of your future raises are compounded from their.

 

[metengr]

SmithJ;
Are you referring to a one time signing bonus or are you evaluating a company that provides a yearly incentive payout (aka bonus) based on company and individual performance. These are totally different comparisons.

Regarding a signing bonus - this is a one time kicker and to me is of minimal weighting for a job consideration. You get it one time and spend it. One time thrill.

On the other hand, if a company provides a yearly incentive payout that is dependent on company and individual performance, this is something to give much higher weighting. Most companies want to hold the line on O&M costs, so they can do this by controlling fixed costs like salaries. The company may offer you annual cost of living raises with some additional amount for individual merit, potential for job promotions and, if possible, provides a yearly incentive payout.

For example, I worked for an electric utility for about 18 years and they rewarded employees with decent raises, promotions based on a scheduled progression and very small yearly bonuses (most of the time no bonuses because they had to justify expense and capital dollar spending). The value in this system is that I had a defined benefit pension plan, which is based on the last five years of your salary (nothing to do with bonuses, so the higher the salary the greater the pension benefit).

Well, the utility sold there generation some time ago and I decided to go with the new owner that offered annual performance raises (cost of living + some level of merit increase) + an annual incentive payout. Over the last 6 years that I have been with the company, the incentive payout averaged 17% of your base salary. So, one needs to consider options very carefully.

PS; I happened to be in the right place during the divestiture because just as my former company sold their generation, I had qualified for an early retirement package (when I reach age 50, I can collect my defined benefit pension).

 

[HVACctrl]

This may sound ungratelful, but I don't think that my compensation is akin to the morsels a street begger can persuade from passers-by. I am full aware that for every dollar I earn, bonuses included, I must make (either directly or indirectly) even more money for my employer. Of course every little bit is appreciated, but I have found that anything less than 5% of one's salary (especially in the field of engineering, where pay and appreciation can be less and work harder than that of the sales and other groups) is pretty much just a ceremonial thing.

Call me what you want, but it is my contention that engineers, as a group, are underpaid and underappreciated. What if our product or rocess is flawless, but the sales team hasn't done their jobs? Our bonuses will suffer for it. Maybe if our pay was where it should be from the get-go, bonuses will be a non-issue.

Ed

 

[Ashereng]

I don't consider bonus when I negotiate my salary. Bonuses usually have specific targets before payouts. Sometimes they pay, sometimes they don't.

I negotiate my salary assuming no bonus. Then, if the bonus comes in, great!

By the way, a company can also roll back your salary. At one job, after 3 months, they instituted a 20% roll back on all salariees across the board.



"Do not worry about your problems with mathematics, I assure you mine are far greater."
Albert Einstein
Have you read FAQ731-376 to make the best use of Eng-Tips Forums?

 

[HDS]

I turned down a job that offered a %25 bonus because the salary was less than I was making.

Unless the bonus is based mostly on things you control like a sales commission I would ignore it.

 

[HVAC68]

Bonus as the name suggests is just that - bonus. Not to be counted as part of the main salary package when one negotiates.

But, when you start talking to the next prospective employer, include bonus and start negotiating !!! - :0)

HVAC68

 

[DaveVikingPE]

"By the way, a company can also roll back your salary. At one job, after 3 months, they instituted a 20% roll back on all salariees across the board."

OUCH!

I guess that's better than being laid off, but...

Rule #1: Take the increase in salary over a bonus, every time, even if there's the threat of a salary roll back. If your paystub or anything written clearly states your salary, you aren't lying to your next employer when they ask you how much you make - and you ask 'em to match it or do better, etc.

Rule #2: NEVER count on a bonus. Hey, it's great and thanks a lot. Really nice, but it's not the reason I come to work every day. Treat bonuses like found money, too. Unless you're a Wall Streeter where the reported bonuses are astronomical (upwards of $300,000 and so), take the bonus and save it for a rainy day.

 

[Ashereng]

Dave,

That was the reasoning by managment. They can lay people off, or roll the salaries back 20%.

The result was the same though. Lots of the "top end" people left, because they could get a better paying job elsewhere. After about half a year, they restored the salaries - but lots of good people left.

"Do not worry about your problems with mathematics, I assure you mine are far greater."
Albert Einstein
Have you read FAQ731-376 to make the best use of Eng-Tips Forums?

 

[corus]

As far as bonuses are concerned, when applying for a loan, banks will only ask what your basic salary is, they're not interested in bonuses as they're well aware that next year bonuses will be rolled back/folded up/put on the top shelf/lost in the tumble drier, or whatever.

corus

 

[dik]

At one firm I was with 20 years ago... probably one of the better outfits in Canada but not close to the largest... during an economic slowdown, we approached management to reduce salaries by 25% to help carry through the recession.

During good years, our profit sharing and bonus cheques were several thousand dollars... just depends on the firm.

Dik

 

[rerig]

I worked for a company that would lay-off at the drop of a hat. One small down turn and off with their heads.

It was a real personality contest. The friends stayed.
Each lay-off found the employable people getting offers and the "Slugs" waiting for a recall.

After about 4 lay-offs we had the best slugs in the industry working there. The standing Joke (Joke ?!) was the "Employee-of-the-Month" board. The banner above the board was temporarly changed to "Friends-and-Family".

I swear to you...the owner was so ticked off he said the "Bonus program is suspended until moral improves". I don't know who he was talking to, we hadn't received a Bonus in a long while.

This company finally went bankrupt. (I'm shocked!)

I agree...Salary is Salary and Bonus is just that, a BONUS.
There are no guarantees about pay, but a Bonus is subjective to the whim of the Bonus giver. Any number can be manipulated. Gotta' love those Comptrollers.

Just my 2 cents worth.
(Giving away my age here...where did the "cents" key go? I had one on my typewriter.)
Rerig

 

[MedicineEng]

I think that a fixed salary with no bonus doesn't foster improvement. I will be slaughtered in this forum to state that but that's how I see things.
In my point of view, I believe that bonuses can be a good tool for improvement and motivation when well applied and fair.
Depending on the position, I would say that the bonus should vary between 100%(staff) and 200% (management)of gross salary.

 

[MedicineEng]

Sorry, just a clarification:
gross monthly salary

 

[SomptingGuy]

When I was first interviewed for my job, it was pointed out that there was bonus based on a fixed share of company profit, which was divided pro-rata according to salary and had been about 10-15% of salary for many years. Then it became based on how much over our budgeted profit we got (a bonus if forecasts were too low). At that point it became clear that the pro-rating had gone, because managers got much higher percentages than mortals, and directors got much higher percentages than managers (those who set the targets decide their own bonuses). Last year the bonus was scrapped because it was "bad for morale". So now we get nothing.

Base salary is all. Be thankfull for overtime if you get it, but don't bank on it.

 

[machmech]

Hi smithj

Simply put

" A bird in the hand is better then two in the bush"

I can't see woking for perks just my two cents worth!

Chuck

 

[ScottyUK]

Hi MedicineEng,

I have pretty much the exact opposite viewpoint to you on bonuses. My employer's bonus system is a very shadowy process based on flawed reasoning and hearsay and is effectively decided by a kangaroo court of managers who are less interested in your ability to do your job than whether your face 'fits' and which football team you support. The outcome is an bonus scheme which is corrupt and rotten to the core. I realise that ours is - hopefully - one of the worst examples out there and some may actually be ok, but I judge as I find and I have been judging this system for nearly ten years now.

I am paid for a number of hours work which are stated in the contract between me and them. I work those hours productively and give a fairly large number as freebies over and above my base hours in the form of uncompensated O/T, barely compensated callout cover, and uncompensated loss of statutory holidays. I would willingly trade the bonus for a proper O/T payment where I am paid for the hours I work. If I am not working, I don't expect to be paid. When I am working, I expect to be paid. This is the simplest and fairest system, and is totally transparent. It is open to abuse only where supervision is either poor or disinterested, allowing people to create O/T when it suits them. Effective management rightly prevents that taking place.

The reason many bonus schemes are popular with employers is that they get a much better deal using the bonus system. The logical conclusion is that if the employer is getting more work done for less money, then the employee must be doing more for less money. Why would an employee want such a system?

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