We are directly in the time of year when those thinking about making a career change must stop and consider the implications of their departure on their 2018 annual bonus.
Virtually all our clients require employment at the company at the time of the payout to receive the bonus. For companies on calendar fiscal years, bonuses are usually paid out in March of the year following the bonus period. So, if you plan to leave your company for another role after the first of the year – and before March – you will leave that annual bonus on the table.
What to do?
Most employers recruiting top talent recognize this as a legitimate issue. They understand that candidates who are entering the fourth quarter of the year expect something to offset the bonus they are leaving behind. Having said that, employers don’t always feel obligated to make a candidate whole, often feeling that future opportunities with their company are the real attraction for making a move.
Below are a few ideas for candidates and employers to consider, all of which have been employed by our clients at one point or another:
A new bonus
The easiest solution to handle a lost bonus is for a new employer to provide a sign on bonus to a new hire that covers all or part of the bonus. This payment will often be made in a few chunks, spread out over time. The company may also include “claw back” provisions in case the new hire leaves sooner than expected.
A new employer can provide a stock grant to offset the lost bonus. This is often considered less onerous than cash in the eyes of an employer, while adding some incentive for a new hire to stick around.
Bonus guarantees are sometimes used to ensure a candidate will not experience a drop in income. These may or may not actually replace a lost bonus but can soften the blow. However, some companies are completely allergic to the concept of a bonus guarantee.
Occasionally, companies will increase the base salary offer. Another option is to review the base salary with a proposal of increasing it in a shorter than normal period of time – maybe 6 months after starting. The issue with this approach for an employer is it increases fixed costs, and if bonuses are calculated as a percentage of salary, incentive costs can be increased as well.
Most employers hate surprises. So, if you expect to find yourself in this situation you should raise the issue sooner rather than later. By addressing it earlier you build some trust and give the employer time to come up with a few solutions. You also give yourself time to decide if making a move is worth losing the bonus you worked so hard for.