5 ms·

When comparing offers or negotiating a raise, how do people translate between a salary and a salary-plus-bonus? When my company got acquired, my base salary di

by sethg 16y ago

When comparing offers or negotiating a raise, how do people translate between a salary and a salary-plus-bonus? When my company got acquired, my base salary didn’t go up, but now I get a performance-based bonus; both my individual performance and the company’s overall hitting-its-numbers are used to compute the bonus figure. If my “normal” bonus (i.e., when everyone hits but does not exceed performance targets) is 10%, should I consider this equivalent to having received a 10% raise? 5%? 0% plus a fistful of lottery tickets?

brown9-2 16y ago
I would think it only really makes sense to compare total compensation (salary + bonus + benefits) when comparing jobs.
- frobozz 16y ago
  Yes, but how do you value a bonus, if you don't know how much it is, or whether you'll get it? A salary of 50K is a salary of 50K, you get 50K over a year. How does that compare to a salary of 45K + bonus? Is it more, less, or the same?
  - bbarthel 16y ago
    My basic formula runs like this - when I'm negotiating, I cite my previous salary as everything I earned - salary + all bonuses plus any other perks I can cite. When I'm comparing, I use only money I'm guaranteed: salary plus any guaranteed or performance bonuses I am confident I can hit (with targets in writing as part of my job agreement). Bonuses that are based on nomination or any other "approval" type process are really just too risky for me to consider as part of my overall compensation package. They will only factor if all else is basically equal.
- sangaya 16y ago
  I recently left a job that paid lower salaries and tried to focus on total compensation through bonus + benefits. The thing is, salary is steady and something I can budget my family off of. We can make decisions such as mortgage's, car payments, savings goals, investment goals, etc off of a salary. I can't do the same with a bonus. In fact, 08/09 made a lot of employees realize that the bonus can't be relied on in any way. Is it possible to make more through total compensation of lower salary + bonus than high salary + little to no bonus? Sure. But I'm happier with the salary, and my hunch is that many other employees would feel the same.
  - ohyes 16y ago
    This is the same for benefits. Benefits programs can have their terms modified from year to year. A company with a great benefits program (ex. paying full tuition on a degree) can drop it from one year to the next. So if you have a budget that includes that degree being paid for, you might find yourself suddenly strapped for cash when you are footing the bill for the degree yourself.
  - brown9-2 16y ago
    This is very true. The variability of a benefit should certainly be taken into account. My point was just that salary alone is not your complete compensation so it shouldn't be the only number looked at.
- generalk 16y ago
  That certainly makes sense, but weigh salary and benefits higher than bonuses. Anecdote: The company I work for had a particularly rough quarter years ago and couldn't make bonuses. Those that had planned on their bonuses being there were suddenly left with a deficit. Even though the company increased bonuses next quarter to make up, that didn't help those guys then.
generalk 16y ago
Personally I don't count bonuses as compensation. They're nice pot-sweeteners but salary is constant whereas bonuses can fluctuate.
- babul 16y ago
  But in many fields e.g. finance/banking/consulting, its all about the bonus, which can be several times your salary. (and yes, this in many ways is the root cause of the current world financial problem, but just saying)
  - generalk 16y ago
    Of course it depends on the field, and for top C-level executives the bonus is pretty much the biggest chunk of compensation. My particular bonus rests on my performance, and is based on profit besides, which is the most common form of bonus I've seen in the trenches of software development.
- metageek 16y ago
  And they may not be treated the same, legally. In Massachusetts, salary is sacrosanct; it is illegal to have an employee working for you if you don't currently have enough money to pay them. But bonuses () are wide open. You can decide not to pay somebody their bonus for any reason, even if the appropriate manager has already said, yes, you've earned it this year. (Yes, this happened to me.) () Discretionary bonuses, that is, where a human decides what you get, rather than a fixed rule.
mcknz 16y ago
Probably somewhere between the lottery tickets and 5%. Both the individual performance and "hitting the numbers" scenarios are extremely subjective, and allow the company to justify cuts pretty much whenever they want. Bonuses make the offer sound better, and it's much easier for the company to say they are "cutting bonuses" rather than "cutting pay," which really amounts to the same thing. I would try to get as much in salary as possible, even if that means the total package is less.
- eru 16y ago
  That makes sense, if you plan to stick around. If you are job-hopping anyway, as some people are, you can just add the bonus to the salary.
  - mcknz 16y ago
    Unless, on the day you start, the company announces that all bonuses will be reduced 75% until the company "makes its numbers." You don't have to be at a place long term to get screwed. A fair question to ask when negotiating would be what % of the bonuses are currently paid, and when was the last bonus cut. Might give some indication of the reliability.

by sethg 16y ago

brown9-2 16y ago

I would think it only really makes sense to compare total compensation (salary + bonus + benefits) when comparing jobs.

frobozz 16y ago
Yes, but how do you value a bonus, if you don't know how much it is, or whether you'll get it? A salary of 50K is a salary of 50K, you get 50K over a year. How does that compare to a salary of 45K + bonus? Is it more, less, or the same?
- bbarthel 16y ago
  My basic formula runs like this - when I'm negotiating, I cite my previous salary as everything I earned - salary + all bonuses plus any other perks I can cite. When I'm comparing, I use only money I'm guaranteed: salary plus any guaranteed or performance bonuses I am confident I can hit (with targets in writing as part of my job agreement). Bonuses that are based on nomination or any other "approval" type process are really just too risky for me to consider as part of my overall compensation package. They will only factor if all else is basically equal.
sangaya 16y ago
I recently left a job that paid lower salaries and tried to focus on total compensation through bonus + benefits. The thing is, salary is steady and something I can budget my family off of. We can make decisions such as mortgage's, car payments, savings goals, investment goals, etc off of a salary. I can't do the same with a bonus. In fact, 08/09 made a lot of employees realize that the bonus can't be relied on in any way. Is it possible to make more through total compensation of lower salary + bonus than high salary + little to no bonus? Sure. But I'm happier with the salary, and my hunch is that many other employees would feel the same.
- ohyes 16y ago
  This is the same for benefits. Benefits programs can have their terms modified from year to year. A company with a great benefits program (ex. paying full tuition on a degree) can drop it from one year to the next. So if you have a budget that includes that degree being paid for, you might find yourself suddenly strapped for cash when you are footing the bill for the degree yourself.
- brown9-2 16y ago
  This is very true. The variability of a benefit should certainly be taken into account. My point was just that salary alone is not your complete compensation so it shouldn't be the only number looked at.
generalk 16y ago
That certainly makes sense, but weigh salary and benefits higher than bonuses. Anecdote: The company I work for had a particularly rough quarter years ago and couldn't make bonuses. Those that had planned on their bonuses being there were suddenly left with a deficit. Even though the company increased bonuses next quarter to make up, that didn't help those guys then.

generalk 16y ago

Personally I don't count bonuses as compensation. They're nice pot-sweeteners but salary is constant whereas bonuses can fluctuate.

babul 16y ago
But in many fields e.g. finance/banking/consulting, its all about the bonus, which can be several times your salary. (and yes, this in many ways is the root cause of the current world financial problem, but just saying)
- generalk 16y ago
  Of course it depends on the field, and for top C-level executives the bonus is pretty much the biggest chunk of compensation. My particular bonus rests on my performance, and is based on profit besides, which is the most common form of bonus I've seen in the trenches of software development.
metageek 16y ago
And they may not be treated the same, legally. In Massachusetts, salary is sacrosanct; it is illegal to have an employee working for you if you don't currently have enough money to pay them. But bonuses () are wide open. You can decide not to pay somebody their bonus for any reason, even if the appropriate manager has already said, yes, you've earned it this year. (Yes, this happened to me.) () Discretionary bonuses, that is, where a human decides what you get, rather than a fixed rule.

mcknz 16y ago

Probably somewhere between the lottery tickets and 5%. Both the individual performance and "hitting the numbers" scenarios are extremely subjective, and allow the company to justify cuts pretty much whenever they want. Bonuses make the offer sound better, and it's much easier for the company to say they are "cutting bonuses" rather than "cutting pay," which really amounts to the same thing. I would try to get as much in salary as possible, even if that means the total package is less.

eru 16y ago
That makes sense, if you plan to stick around. If you are job-hopping anyway, as some people are, you can just add the bonus to the salary.
- mcknz 16y ago
  Unless, on the day you start, the company announces that all bonuses will be reduced 75% until the company "makes its numbers." You don't have to be at a place long term to get screwed. A fair question to ask when negotiating would be what % of the bonuses are currently paid, and when was the last bonus cut. Might give some indication of the reliability.