4 ms·

I wonder if there's a need to read the entire article, because anyone who thinks a little bit about continuous costs and one off costs will arrive at the same c

I wonder if there's a need to read the entire article, because anyone who thinks a little bit about continuous costs and one off costs will arrive at the same conclusion as mentioned in the first paragraph: > a move that gives them more flexibility to dial back that compensation if the economy turns sour. To add further, though salary cuts can be done by companies (this may vary across geographies), it's usually a little more cumbersome and also sends a different message to employees. It's a lot easier to put in vacation caps (thus chopping off the ability to use the provided compensation completely) or not pay a bonus. While bad for morale, at least some employees may not consider these moves as a loss from the status quo. That's why different kinds of variable pay schemes is very attractive for employers so that they have several knobs to control. As far as I'm concerned, employees should consider their base salary, benefits and some expected bonus as their fixed compensation so that they can better understand if the company is just skimming money and not rewarding their work because top executives want the bonuses for themselves (even when the situation looks like it wouldn't hurt to give some additional compensation). This behavior is quite common in many companies, and is probably one of the reasons why the CEO to average employee compensation has become increasingly skewed over time and is getting worse. On the other hand, given a choice, most employees would choose a salary increase (continuous increase) over an unpredictable and one off bonus or any other benefit that can be easily cut.

olliej 8y ago
Lots of executive have “low” salaries in exchange for one off* bonuses :D * though they do seem to get a lot of one offs...
coaxial 8y ago
In my experience, bonuses are also very discretionary and completely opaque. I've seen countless offers touting a sizeable bonus at the entire discretion of the company with no way to know what are the criteria for award. And what do you know, nobody ever got these phantom bonuses because reasons. But it was included in offer letters and used to lower the negotiated salary as of it was a sure thing, and not everyone was savvy enough to push back.
- foobiekr 8y ago
  I've worked at companies that document bonuses and companies that don't. Documented bonuses are a completely different situation. My current employer is documented: it calculates your pro-rated fraction at each grade level for the bonus period two deal with promotions and then divides by 2 (bonus is paid out in two payments per year) and then multiplies grade level * company performance * employee performance. Any employee can calculate exactly how their manager ranked their performance. They can complain (or leave). With one weird exception people's grade levels are visible to others which means their bonus target is visible. For some people, 100% of their details (everything: base, etc.) are sometimes known to anyone who is interested (this applies to me). (I should note that I don't think the compensation is transparent at VP level and above and know from experience there are tons of shenanigans there.) When I worked for companies that did not document the bonus methodology, it was appalling. Bonuses were for glory hounds and friends of management. Terrible. A lot of employees didn't even know bonuses were paid. I think the same issues exist for compensation (equity and base as well as special packages or retention bonuses) that exist for bonuses. It would be interesting to see if you could meaningfully execute a company with total transparency but I don't think it would survive contact with reality.
  - maxxxxx 8y ago
    "It would be interesting to see if you could meaningfully execute a company with total transparency but I don't think it would survive contact with reality. " I think you can. There are some companies that do it already and places like military and Congress (they fully publish salaries) are transparent without falling apart. Secrecy around salaries is just a tool for employers to keep salaries low.
    - meowface 8y ago
      It is a tool to keep salaries low, but when salaries are known, it can definitely create bitterness, jealousy, and resentment. "[X] definitely knows way less than me, has way less experience than me, and is a lot worse at their job, yet they're being paid almost double what I am" isn't great for morale.
reboog711 8y ago
This was a sticking spot to a recent negotiation I had. I fought for higher salary, but they added it into bonus.
cpeterso 8y ago
Raises also compound if you get a raise year after year. A bonus probably won't increase each year.
mc32 8y ago
>>a move that gives them more flexibility to dial back that compensation if the economy turns sour. That’s the only thing that makes sense. Asian economies learned this a while ago —but it leads to seasonal departures (after bonus distribution). But yeah much easier to say bonuses will be reduced than to say salaries will get cut during lean times.
dunpeal 8y ago
> To add further, though salary cuts can be done by companies (this may vary across geographies), it's usually a little more cumbersome and also sends a different message to employees. It's a lot more cumbersome, and will create a lot more friction and problems. The key reason there's even a distinction between salary and bonus is that a salary is guaranteed as long as you work there, while the bonus is not.
- rootusrootus 8y ago
  OTOH, when the bonus has been paid out reliably for years, then the distinction gets pretty blurry. My company just cut bonuses this year for the first time in memory, by almost 40%. In the last two weeks we have had a half dozen new resignations per day. The company is profitable, they just set a target for year-over-year revenue gain that has not ever been met in the company's history, so that they'd have an excuse to pay less. And now everyone's pissed and the best folks are walking. I am pretty sure it was deliberate, a way of cutting way back without having to give severance or make the news.
  - fma 8y ago
    I'm in the same boat. We have measurements and the bar gets moved every year. Now we are at 150% profitability compared 2 years...and the bonus were nice. Now to get our regular size bonus we need to keep it up. In other words, the company makes more money than before, and pays less bonus.
    - maxxxxx 8y ago
      Your CEO has a nice boat on order. The money has to come from somewhere :-)
  - dunpeal 8y ago
    > The company is profitable, they just set a target for year-over-year revenue gain that has not ever been met in the company's history, so that they'd have an excuse to pay less. And now everyone's pissed and the best folks are walking. Doesn't sound like that "excuse" is working for them. > I am pretty sure it was deliberate, a way of cutting way back without having to give severance or make the news. It's the absolute worst way of doing layoffs. As you observed, the people walking out are the best performers who have great options elsewhere. Guess who stays? Adverse selection in action.

olliej 8y ago

Lots of executive have “low” salaries in exchange for one off* bonuses :D * though they do seem to get a lot of one offs...

coaxial 8y ago

In my experience, bonuses are also very discretionary and completely opaque. I've seen countless offers touting a sizeable bonus at the entire discretion of the company with no way to know what are the criteria for award. And what do you know, nobody ever got these phantom bonuses because reasons. But it was included in offer letters and used to lower the negotiated salary as of it was a sure thing, and not everyone was savvy enough to push back.

foobiekr 8y ago
I've worked at companies that document bonuses and companies that don't. Documented bonuses are a completely different situation. My current employer is documented: it calculates your pro-rated fraction at each grade level for the bonus period two deal with promotions and then divides by 2 (bonus is paid out in two payments per year) and then multiplies grade level * company performance * employee performance. Any employee can calculate exactly how their manager ranked their performance. They can complain (or leave). With one weird exception people's grade levels are visible to others which means their bonus target is visible. For some people, 100% of their details (everything: base, etc.) are sometimes known to anyone who is interested (this applies to me). (I should note that I don't think the compensation is transparent at VP level and above and know from experience there are tons of shenanigans there.) When I worked for companies that did not document the bonus methodology, it was appalling. Bonuses were for glory hounds and friends of management. Terrible. A lot of employees didn't even know bonuses were paid. I think the same issues exist for compensation (equity and base as well as special packages or retention bonuses) that exist for bonuses. It would be interesting to see if you could meaningfully execute a company with total transparency but I don't think it would survive contact with reality.
- maxxxxx 8y ago
  "It would be interesting to see if you could meaningfully execute a company with total transparency but I don't think it would survive contact with reality. " I think you can. There are some companies that do it already and places like military and Congress (they fully publish salaries) are transparent without falling apart. Secrecy around salaries is just a tool for employers to keep salaries low.
  - meowface 8y ago
    It is a tool to keep salaries low, but when salaries are known, it can definitely create bitterness, jealousy, and resentment. "[X] definitely knows way less than me, has way less experience than me, and is a lot worse at their job, yet they're being paid almost double what I am" isn't great for morale.

reboog711 8y ago

This was a sticking spot to a recent negotiation I had. I fought for higher salary, but they added it into bonus.

cpeterso 8y ago

Raises also compound if you get a raise year after year. A bonus probably won't increase each year.

mc32 8y ago

>>a move that gives them more flexibility to dial back that compensation if the economy turns sour. That’s the only thing that makes sense. Asian economies learned this a while ago —but it leads to seasonal departures (after bonus distribution). But yeah much easier to say bonuses will be reduced than to say salaries will get cut during lean times.

dunpeal 8y ago

> To add further, though salary cuts can be done by companies (this may vary across geographies), it's usually a little more cumbersome and also sends a different message to employees. It's a lot more cumbersome, and will create a lot more friction and problems. The key reason there's even a distinction between salary and bonus is that a salary is guaranteed as long as you work there, while the bonus is not.

rootusrootus 8y ago
OTOH, when the bonus has been paid out reliably for years, then the distinction gets pretty blurry. My company just cut bonuses this year for the first time in memory, by almost 40%. In the last two weeks we have had a half dozen new resignations per day. The company is profitable, they just set a target for year-over-year revenue gain that has not ever been met in the company's history, so that they'd have an excuse to pay less. And now everyone's pissed and the best folks are walking. I am pretty sure it was deliberate, a way of cutting way back without having to give severance or make the news.
- fma 8y ago
  I'm in the same boat. We have measurements and the bar gets moved every year. Now we are at 150% profitability compared 2 years...and the bonus were nice. Now to get our regular size bonus we need to keep it up. In other words, the company makes more money than before, and pays less bonus.
  - maxxxxx 8y ago
    Your CEO has a nice boat on order. The money has to come from somewhere :-)
- dunpeal 8y ago
  > The company is profitable, they just set a target for year-over-year revenue gain that has not ever been met in the company's history, so that they'd have an excuse to pay less. And now everyone's pissed and the best folks are walking. Doesn't sound like that "excuse" is working for them. > I am pretty sure it was deliberate, a way of cutting way back without having to give severance or make the news. It's the absolute worst way of doing layoffs. As you observed, the people walking out are the best performers who have great options elsewhere. Guess who stays? Adverse selection in action.