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Old 01-11-2006, 09:49 AM   #1
cwb124
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Default Should a bonus be considered part of your compensation package?

Here's the deal, I am an IT consultant. There are 4 engineers on my team. There is a team goal of $XX,XXX. If everyone bills that much money in a month, each of us get $500 bonus. There is a personal goal as well at $XX,XXX + $2,000. If you make that, you get an extra $500. Total possible bonus for each month is $1k. If the team doesn't make it's goal but you make your personal number, that's $500.

Anyway, my salary for my position (MCSE, CCA) is quite a bit lower than the market rate, about $10k I'd assume, give or take. In 2005 I made both personal and team goals 9 months. I made team or personal 2 months and the last month was the first month working there so it was training.

So my salary with bonuses last year got me to where I believe I am worth. My employer argues that I was paid what I am worth last year. Is this true? Yeah we had a great year last year, but if sales start going down or management makes some bad decisions and we don't have the opportunity to bill to our goal each month, then I'm not being paid what I'm worth.

Do you agree with this mentality, or should a bonus be an actual bonus, above and beyond what you're worth? I personally think a bonus is just that, extra money to compensate for meeting or exceeding goals.
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Old 01-11-2006, 09:52 AM   #2
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i agree with you.
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Old 01-11-2006, 09:59 AM   #3
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It is commonly included as consideration, you're right.
Unfortunately, corporate attitude has been going a more "global" direction in the last 5-10 years.

They've been making bonus contingent less on your personal performance, and more on the shared performance of a group/department/company. Their thought process is that it will motivate everyone at once, since everyone's ass in on the line for it. But what it really does is demotivate everyone b/c they no longer have any control over "their own" bonus.

I'd consider a bonus what it is quickly becoming...a nice to have that you can't plan on

DRum
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Old 01-11-2006, 10:11 AM   #4
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Quote:
Originally Posted by DrDRum
I'd consider a bonus what it is quickly becoming...a nice to have that you can't plan on

DRum
I agree with you, that's why I think my salary needs to go up and they need to realize that a bonus is a friggin bonus, something over and above salary and something that isn't guaranteed, because it isn't. Half of my monthly bonus I have no control over. If one of my team takes a week or 10 day vacation, then there's a chance I won't get my team goal and I'm out $500 that month. If business sucks that month I may not get my personal goal either. There's too many things out of my control for it to be considered part of my salary.
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Old 01-11-2006, 10:15 AM   #5
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my comp is based 65% on salary and 35% on 'comissions' and quarterly bonuses. I work in telecom, managing business accounts - we get a comission for renewing a contract and are bonused on retention.

From my perspective, you have incentives to produce, thus that's part of your compensation (just like me).
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Old 01-11-2006, 10:19 AM   #6
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i think it depends on how it is offered and on what terms its given. I take what we have made at the middle and end of the year and disperse it to my guys based on what I think is their contribution to the company and I would say that is part of their total compensation.
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Old 01-11-2006, 10:23 AM   #7
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I agree...corporate america is in a trasition right now, as you see.
Corporate america is not sure how to handle compensation right now, including bonuses. Bonuses used to be part of your compensation, for a number of reasons, mostly because most people's contracts actually included a clause for the bonus; it was more or less guaranteed, if not expected. The market is changing, and the trend is to downsizing and consolidation rather than rewarding specialization as was previously embraced for the last 30-50 years. This is due to profit margins decreasing in general.

Compound that with their "creative" efforts on how to still adequately compensate (or have the employees feel that they are adequately compensated), while rearranging how compensation is actually done to save the company money...

Corporate america is becoming more and more controlled by HR, whose perogotive is to protect and save the company money/liablity. Their modus is to make you feel like they're on your side, of course. IMHO, the direction will be that they are selling this "new, global" bonus system as "better for you...b/c you're more handsomely benefitted when the company does better, you can make even more ", aiming for a more "hooray for the company" corporate attitude from the employees. But you can paint a turd red, its still a turd.

I don't see it changing, though

DRum
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Old 01-11-2006, 10:23 AM   #8
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Bonuses are taxed differently, and you are never sure about getting them.

SHOULD they be considered as part of compensation? No. You usually pay around 49% tax on them if you get them at all.

ARE they? I guess.
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Old 01-11-2006, 10:26 AM   #9
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Quote:
Originally Posted by HOV
Bonuses are taxed differently, and you are never sure about getting them.

SHOULD they be considered as part of compensation? No. You usually pay around 49% tax on them if you get them at all.

ARE they? I guess.
that is not true. It's only taxed that much if your accountant doesn't just deduct the usual amount. You can give a XXX,XXX bonus and have it taxed an your regular amount without any penalties.
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Old 01-11-2006, 10:27 AM   #10
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If you are worth more then quit. Don't expect your current job to pay you more because they won't and it's unlikely you will be able to bluff them into more money. So go get another job that pays market value.
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Old 01-11-2006, 10:27 AM   #11
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Quote:
Originally Posted by HOV
Bonuses are taxed differently, and you are never sure about getting them.

SHOULD they be considered as part of compensation? No. You usually pay around 49% tax on them if you get them at all.

ARE they? I guess.
They show up as Commission on my checks. For the $1k bonus I get in a month, I get $635 out of it. Pisses me off.
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Old 01-11-2006, 10:28 AM   #12
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Bounses count as unearned income. It sucks, but that's how it goes.

I'd suggest you go to your boss and negotiate. Tell him how you've hit your personal goals for so many months and how it's not really a goal if you do it all the time. It's just your normal work. Ask him to up your monthly salary by $500 and to raise your performance goal, with the same $500 bonus if you get it. You can always tell him how he is giving more money to the government by doing it the way he does it.
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Old 01-11-2006, 10:31 AM   #13
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It's not uncommon to have bonus money as part of your compensation plan; but it varies on what your job is. Since you have a billable target as part of your incentive, I say it's appropriate. I am an SE, and I get comped partially by salary, and my 'At Plan' target earnings include bonus money, paid on a percentage of sales. This is a fairly standard way to do things, as it incentivises you to perform. I don't see any monkey business. now, if you were a straight engineer, and not a consultant, it might be a different story. BTW when I was in a professional services role, it was very similar, which was more akin to what you do than what I do now.
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Old 01-11-2006, 10:32 AM   #14
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Quote:
Originally Posted by cwb124
They show up as Commission on my checks. For the $1k bonus I get in a month, I get $635 out of it. Pisses me off.
that's just how the deductions are done, which means nada come April 15. Total compensation = your tax bracket. I used to be on a straight commission based pay....no base salary. When I had a $10K check for a week, I'd be taxed at the highest bracket. Other weeks when I had a 'normal' check, I'd be taxed at the appropriate level. At the end of the year, my total earnings determined my tax burden.
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Old 01-11-2006, 10:32 AM   #15
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I should mention that my experience comes from a non-sales role. I'm an engineer, and I've seen it done for exempt and non-exempt structures equally.

DRum
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Old 01-11-2006, 10:39 AM   #16
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Quote:
Originally Posted by cwb124
Here's the deal, I am an IT consultant. There are 4 engineers on my team. There is a team goal of $XX,XXX. If everyone bills that much money in a month, each of us get $500 bonus. There is a personal goal as well at $XX,XXX + $2,000. If you make that, you get an extra $500. Total possible bonus for each month is $1k. If the team doesn't make it's goal but you make your personal number, that's $500.

Anyway, my salary for my position (MCSE, CCA) is quite a bit lower than the market rate, about $10k I'd assume, give or take. In 2005 I made both personal and team goals 9 months. I made team or personal 2 months and the last month was the first month working there so it was training.

So my salary with bonuses last year got me to where I believe I am worth. My employer argues that I was paid what I am worth last year. Is this true? Yeah we had a great year last year, but if sales start going down or management makes some bad decisions and we don't have the opportunity to bill to our goal each month, then I'm not being paid what I'm worth.

Do you agree with this mentality, or should a bonus be an actual bonus, above and beyond what you're worth? I personally think a bonus is just that, extra money to compensate for meeting or exceeding goals.
As an employer I have some very harsh pro-employer feelings about compensation.

First, you are only worth what I pay you and everyone can be replaced.

Second, if you feel you are worth MORE than I pay you, go out into the world and find a job that pays more.

Buckeye_Kid thinks most people think they are worth much more than they really are.
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Old 01-11-2006, 10:39 AM   #17
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This year my raise sucked they are making it up in the bonus though hahah will see what they coem up with this year.
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Old 01-11-2006, 10:40 AM   #18
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Quote:
Originally Posted by RyanC
It's not uncommon to have bonus money as part of your compensation plan; but it varies on what your job is. Since you have a billable target as part of your incentive, I say it's appropriate. I am an SE, and I get comped partially by salary, and my 'At Plan' target earnings include bonus money, paid on a percentage of sales. This is a fairly standard way to do things, as it incentivises you to perform. I don't see any monkey business. now, if you were a straight engineer, and not a consultant, it might be a different story. BTW when I was in a professional services role, it was very similar, which was more akin to what you do than what I do now.
I'm actually an SE, but consultant is sometimes easier for people to understand. I just don't like the mentality of "we'll lowball you and only pay you what you're worth if you exceed all our goals".
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Old 01-11-2006, 10:45 AM   #19
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Quote:
Originally Posted by Buckeye Kid
As an employer I have some very harsh pro-employer feelings about compensation.

First, you are only worth what I pay you and everyone can be replaced.

Second, if you feel you are worth MORE than I pay you, go out into the world and find a job that pays more.

Buckeye_Kid thinks most people think they are worth much more than they really are.
Wow, and people wonder why employees aren't loyal anymore. Doesn't it cost you money when you have to replace them? You are out of productivity for X amount of time, have to spend time on ads, interviews, and then training time is usually unproductive.
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Old 01-11-2006, 10:51 AM   #20
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Quote:
Originally Posted by Buckeye Kid
As an employer I have some very harsh pro-employer feelings about compensation.

First, you are only worth what I pay you and everyone can be replaced.

Second, if you feel you are worth MORE than I pay you, go out into the world and find a job that pays more.

Buckeye_Kid thinks most people think they are worth much more than they really are.
You must have high turnover...I wouldn't work for you very long.

You would do well to learn the benefits of:
- employee morale
- employee's sense of appreciation
- respect in the workplace

The boss before my last was awesome. He respected me, my opinion, and stood behind me no matter what. I worked my ass off for him...and he knew it. He gave me a $3000 raise in the middle of the year b/c he said "I deserved it". I didn't ask for it. I worked at least 5 hours overtime for him...worked overnights sometimes...and I ended up loving work.

He unfortunately left, and was replaced by a real *******. He micromanaged everything I did, and didn't give a **** about any of us. Then he stiffed the whole group come merit increase time. Would you like to guess how excited I was to work for him? How about how the morale and resultant productivity of the group was affected? How about how long it took before I was looking for other work?

DRum
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Old 01-11-2006, 11:03 AM   #21
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Quote:
Originally Posted by DrDRum
You must have high turnover...I wouldn't work for you very long.

You would do well to learn the benefits of:
- employee morale
- employee's sense of appreciation
- respect in the workplace

The boss before my last was awesome. He respected me, my opinion, and stood behind me no matter what. I worked my ass off for him...and he knew it. He gave me a $3000 raise in the middle of the year b/c he said "I deserved it". I didn't ask for it. I worked at least 5 hours overtime for him...worked overnights sometimes...and I ended up loving work.

He unfortunately left, and was replaced by a real *******. He micromanaged everything I did, and didn't give a **** about any of us. Then he stiffed the whole group come merit increase time. Would you like to guess how excited I was to work for him? How about how the morale and resultant productivity of the group was affected? How about how long it took before I was looking for other work?

DRum
Great points. No offense to buckeye kid at all, but he sounds just like the owner of my company. This guy is a bean counter only, that's what he goes by. You're worth X and you're not getting a penny above that. He has no idea how to deal with people, or any concept of employee morale or motivation or employee retention or the effect of turnover.

A good example is our bonus goals. Our premium goal is at $XX,XXX. If I make that goal and the team made their goal I get $1k. If I make $9k over that goal, which I have 3 times this year, I get nothing else. There's no motivation for me to work past that premium goal, especially if there's a chance I am taking work away from myself for the next month.
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Old 01-11-2006, 11:10 AM   #22
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Quote:
Originally Posted by Buckeye Kid
As an employer I have some very harsh pro-employer feelings about compensation.

First, you are only worth what I pay you and everyone can be replaced.

Second, if you feel you are worth MORE than I pay you, go out into the world and find a job that pays more.

Buckeye_Kid thinks most people think they are worth much more than they really are.
these things are all true, of course, until people actually start taking you up on leaving for a job that pays what they're worth. then, you're forced to pay a new, competent untrained guy more than you were paying the trained guy that left for market value. Or, you can pay an incompetent guy the same or less, your choice.

when multiple people leave at a time, companies take major hits, which is why it's important for employers to be proactive in these markets.

in truth, most people get comfortable in jobs, and end up working for less than their market value because they fear the change of a new job making what they're worth.
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Old 01-11-2006, 11:16 AM   #23
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Did they disclose that you could 'bonus' at the end of they year/anniversary up front upon hiring? Did you 'budget' for it?

If the answer is No, then it is NOT part of your compensation.

This question gets muddy when you consider bonusing 'variable' pay.
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Old 01-11-2006, 11:20 AM   #24
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What does your compensation plan say? If the employer has to report it to you on your W-2, then it is part of your compensation. It will also be considered as part of your plan compensation if you have a 401k plan.
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Old 01-11-2006, 11:21 AM   #25
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Quote:
Originally Posted by Buckeye Kid
As an employer I have some very harsh pro-employer feelings about compensation.

First, you are only worth what I pay you and everyone can be replaced.
This really depends on your business. If you run a retail store and your cashier quits then it's most likely easy to hire and train a new cashier.

If you run a software development house that builds proprietary solutions for corporate clients and you make your top developer unhappy and he leaves it's probably going to be hard to fill that gap.

Quote:
Originally Posted by Buckeye Kid
Second, if you feel you are worth MORE than I pay you, go out into the world and find a job that pays more.
Keep telling people that and they most certainly will do so.

Quote:
Buckeye_Kid thinks most people think they are worth much more than they really are.
Well Buckeye_Kid you may be right, but it pays to be cautious about who you think is worth the money and who isn't.
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