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The smartest piece of advice I ever got on bonuses: they are part of your salary that your employer reserves the right to discretionarily not pay you. I conside

The smartest piece of advice I ever got on bonuses: they are part of your salary that your employer reserves the right to discretionarily not pay you. I consider bonuses of absolutely no account in a comp package. If they are given, I happily accept. If not, I have no disappointment. I give the company my diligent efforts because I care about my responsibilities and my colleagues regardless. A carrot on a treadmill isn't going to change that.

t_mann 4y ago
You say that now, but once you actually are in such a position and you realize that you could pay off your college debt plus your mortgage in 2-3 years, things might change in your mind.
- lr4444lr 4y ago
  At the companies where the bonuses could reasonably be that high, I'd probably rather have stock options - because those are contractually mine.
  - coliveira 4y ago
    No company will give you options from day one. They will give them over several years if you meet their expectations, which is essentially the same as a bonus.
    - lr4444lr 4y ago
      Yes, obviously, but what is promised to me is still contractual in time and amount precisely.
- ipaddr 4y ago
  When you count on that bonus that came last year it could mean that mortgage goes under. Making a lot of money is great until it doesn't come for whatever reason.
  - t_mann 4y ago
    By 'paying off your mortgage' I obviously meant repaying the principal plus interest in full, not meeting your regular payments. It should go without saying that you shouldn't take out a mortgage where you can't afford the regular payments out of your regular income. Banks are very unlikely to grant you such a loan anyway.
- vsareto 4y ago
  Yearly bonuses can carry a large amount of risk for the time and work invested, especially if you've traded base salary for it (which could go into investments). And the bonuses are not as transparent or regulated as even risky investments. The real problem with them is the year long bet. Do it quarterly or monthly, and I'm all for it. There are situations where it definitely makes sense, like if you're pretty secure without the bonus, you're friendly with the people deciding the bonuses, the base salary is high enough, there is some guaranteed minimum bonus, and you don't burn out trying to attain/maximize it. Ultimately, you can't get away from the fact that some financial health is at the whim of persons within the company and frankly they just aren't going to care as much about it as you do. It's very much a gamble instead of a solid investment.
- supernovae 4y ago
  that’s gambling, not wages.
- astrange 4y ago
  That’s not a problem in California because it’s not possible to buy anything to get the mortgage in the first place.
  - paulryanrogers 4y ago
    So all houses are cash only?!
    - astrange 4y ago
      They are if you’re competing with someone paying cash. But that doesn’t matter either, the question is if there’s any for sale in the first place.
    - newshorts 4y ago
      Nah. A buyer can easily outbid an all cash offer. In fact, if you offer 100% over asking price you’re almost guaranteed to win ;)
      - wan23 4y ago
        Good luck explaining to the bank why you want to borrow 2x what the home is actually worth. When you need a mortgage you’re limited by what the bank’s appraiser thinks the home should sell for.
CPLX 4y ago
Sure but because that’s true they’re a way for the company to possibly pay quite a bit more. As someone on the other side of the table who has to make comp decisions, I honestly want to pay the team as much as we can afford while being careful to maintain the financial health of the company. I really do, the more I pay people the more likely they are to feel rewarded and go the extra mile and not quit. But that can be scary, since you can’t lower comp as a manager, that’s not really possible. If you’re overconfident you can end up in a genuine crisis. So I pay as much as I know I can afford, and then as a period closes I can look back and pay the extra that I can now be sure I can afford since the results are in. It’s a mechanism to help me pay the maximum the business can afford. It’s in place to help the team make the most money possible. Clearly not every situation will be like this. Clearly somehere there’s someone dangling bonuses as a cynical way to exploit people. But it’s unfair to dismiss the concept out of hand. Especially in volatile lines of business or very fast growing companies.
- lr4444lr 4y ago
  I can't say I outright dislike anything you're saying, and I do understand your position. My key issue however is that I need to risk assess and budget my life just as you need to do your business. I simply can't do that on the basis of a bonus. It might give me the chance to take a more luxurious vacation or pay down a debt a little faster than I had anticipated, which is wonderful, really, but it's like an inheritance: I have next to no control over it and can't plan my life that way. Lesser comp. that I can plan for gives me control of my life that I'd rather have instead. Stock options are where I'd rather take the risk, because that's a longer haul that I can plan and adjust for with well worn investor metrics, and more importantly, I don't lose and can exercise when it works for me.
throwaway675309 4y ago
I'm the exact same way, base pay plus vacation time are the most important factors. Bonuses are usually up to some percentage and realistically they're never even close to the full amount that's ostensibly promised. Just a good way to proverbially crack the whip.
pandaman 4y ago
This depends on the comp structure. What you described is true for the old-school 15% performance bonus. This is usually a performance tool and allows finer punishment/encouragement than "fired on the first mistake"/"promoted on the first success". However, there are firms that do profit-sharing and it is not 15% of your base but multiplies of the base. Many people find it hard to ignore.

t_mann 4y ago

You say that now, but once you actually are in such a position and you realize that you could pay off your college debt plus your mortgage in 2-3 years, things might change in your mind.

lr4444lr 4y ago
At the companies where the bonuses could reasonably be that high, I'd probably rather have stock options - because those are contractually mine.
- coliveira 4y ago
  No company will give you options from day one. They will give them over several years if you meet their expectations, which is essentially the same as a bonus.
  - lr4444lr 4y ago
    Yes, obviously, but what is promised to me is still contractual in time and amount precisely.
ipaddr 4y ago
When you count on that bonus that came last year it could mean that mortgage goes under. Making a lot of money is great until it doesn't come for whatever reason.
- t_mann 4y ago
  By 'paying off your mortgage' I obviously meant repaying the principal plus interest in full, not meeting your regular payments. It should go without saying that you shouldn't take out a mortgage where you can't afford the regular payments out of your regular income. Banks are very unlikely to grant you such a loan anyway.
vsareto 4y ago
Yearly bonuses can carry a large amount of risk for the time and work invested, especially if you've traded base salary for it (which could go into investments). And the bonuses are not as transparent or regulated as even risky investments. The real problem with them is the year long bet. Do it quarterly or monthly, and I'm all for it. There are situations where it definitely makes sense, like if you're pretty secure without the bonus, you're friendly with the people deciding the bonuses, the base salary is high enough, there is some guaranteed minimum bonus, and you don't burn out trying to attain/maximize it. Ultimately, you can't get away from the fact that some financial health is at the whim of persons within the company and frankly they just aren't going to care as much about it as you do. It's very much a gamble instead of a solid investment.
supernovae 4y ago
that’s gambling, not wages.
astrange 4y ago
That’s not a problem in California because it’s not possible to buy anything to get the mortgage in the first place.
- paulryanrogers 4y ago
  So all houses are cash only?!
  - astrange 4y ago
    They are if you’re competing with someone paying cash. But that doesn’t matter either, the question is if there’s any for sale in the first place.
  - newshorts 4y ago
    Nah. A buyer can easily outbid an all cash offer. In fact, if you offer 100% over asking price you’re almost guaranteed to win ;)
    - wan23 4y ago
      Good luck explaining to the bank why you want to borrow 2x what the home is actually worth. When you need a mortgage you’re limited by what the bank’s appraiser thinks the home should sell for.

CPLX 4y ago

Sure but because that’s true they’re a way for the company to possibly pay quite a bit more. As someone on the other side of the table who has to make comp decisions, I honestly want to pay the team as much as we can afford while being careful to maintain the financial health of the company. I really do, the more I pay people the more likely they are to feel rewarded and go the extra mile and not quit. But that can be scary, since you can’t lower comp as a manager, that’s not really possible. If you’re overconfident you can end up in a genuine crisis. So I pay as much as I know I can afford, and then as a period closes I can look back and pay the extra that I can now be sure I can afford since the results are in. It’s a mechanism to help me pay the maximum the business can afford. It’s in place to help the team make the most money possible. Clearly not every situation will be like this. Clearly somehere there’s someone dangling bonuses as a cynical way to exploit people. But it’s unfair to dismiss the concept out of hand. Especially in volatile lines of business or very fast growing companies.

lr4444lr 4y ago
I can't say I outright dislike anything you're saying, and I do understand your position. My key issue however is that I need to risk assess and budget my life just as you need to do your business. I simply can't do that on the basis of a bonus. It might give me the chance to take a more luxurious vacation or pay down a debt a little faster than I had anticipated, which is wonderful, really, but it's like an inheritance: I have next to no control over it and can't plan my life that way. Lesser comp. that I can plan for gives me control of my life that I'd rather have instead. Stock options are where I'd rather take the risk, because that's a longer haul that I can plan and adjust for with well worn investor metrics, and more importantly, I don't lose and can exercise when it works for me.

throwaway675309 4y ago

I'm the exact same way, base pay plus vacation time are the most important factors. Bonuses are usually up to some percentage and realistically they're never even close to the full amount that's ostensibly promised. Just a good way to proverbially crack the whip.

pandaman 4y ago

This depends on the comp structure. What you described is true for the old-school 15% performance bonus. This is usually a performance tool and allows finer punishment/encouragement than "fired on the first mistake"/"promoted on the first success". However, there are firms that do profit-sharing and it is not 15% of your base but multiplies of the base. Many people find it hard to ignore.