7 ms·

Keep your job for five years, get $50,000

58 points by kirpekar 15y ago

nobody3141592 15y ago
Will keep all the useless staff What do you do to keep the good ones that could get a job that pays $11K/year more and so in 5 years they would have $55K ?
- scrrr 15y ago
  Sounds reasonable. But there's also people that are skilled but dislike change. They will be rewarded and will feel confirmed in their belief ("it will be rewarded to stay on board") this way.
- nfm 15y ago
  I'm sure it's part of a larger strategy. Explicitly valuing staff retention means that he probably also recognises the value of company culture, group ownership, and so on.
- theshadow 15y ago
  There is something to be said about a lumpsum payment of $50k that is psychologically more attractive to people than the same about of money amortized over a period of 60 months. Extra 11k a year comes down to an extra $900 a month, which for a lot of people is not as psychologically impactful as getting a $50k payment. Smart strategy by the company.
  - greenyoda 15y ago
    Unfortunately, getting the $50K as a lump sum could have negative tax implications. If it pushes you into a higher tax bracket, you could end up paying more tax than if you got a little bit each year. Plus, you'll have the disappointment of seeing much less than $50K after all the taxes (income taxes, social security, etc.) are withheld. Also, by having to wait five years for the money, you're giving up any possible investment gains and income that you could have made if you'd had the money earlier.
    - nknight 15y ago
      I'm not sure how easy this would be legally, but they might be able to set it up to drop most of the $50k into the employee's 401k. The employer + employee contribution limits are currently $49k/year, so even if the employee is contributing their $16.5k max, you could mitigate a hell of a lot of the taxes.
- nknight 15y ago
  Useless staff can still be fired, he's not offering them lifetime employment. And I've seen first hand the damage done by getting rid of the "mediocre" people who have been around for ages in favor of a new hotshot. Discontinuity and destruction of institutional knowledge has enormous hidden costs.
fennecfoxen 15y ago
Sounds a lot like stock options, but without the stock, and a much steeper "cliff" than the classic vesting schedule. I wonder how many people will stay 5 years, collect the (one-time) payout, then leave shortly thereafter?
- fleitz 15y ago
  That's kind of the point, to get them to stay for 5 years. It's an extra $10,000 per year in pay that is only payable if they stay 5 years. Most people leave for better pay, this mitigates that and will not always have to be paid. If they stay til 5 years and then leave after getting the cheque that's an extra couple of years. It's also a major negotiating point on salary raises. (eg. An employee of 4 years is more worried about the 50K than rocking the boat for an extra 10K raise). This offer like most perks is cleverly constructed to make an employee who is about to leave stay and think he is getting one over on the company by leaving the day after he gets his $50,000. (Which most employees won't actually do because they aren't sharks)
tomjen3 15y ago
I guess it makes sense if you have been there for, say, three years that you then stay an extra two years (you didn't already plan on) before seeking a job elsewhere. Considering that any other job would have to give you 25000 more, staying is properly the best offer. But really outside of that situation it wouldn't seem as an attractive offer. It is not difficult to imagine some other company offering you 10k more especially if you are hitting the first big milestone of 3-5 year professional experience (even if that measure is, at best, bullshit).
- DrHankPym 15y ago
  10K extra a year would financially be more expensive to invest than 50K five years later.
  - msg 15y ago
    ? The future value of money is discounted by inflation and the opportunity cost of failing to invest. According to this inflation calculator for US, you would lose about $1000 just from inflation if you deferred your bonus for the five years from 2005 to 2010. "What cost $10000 in 2005 would cost $11067.95 in 2010." http://www.westegg.com/inflation/ http://www.westegg.com/inflation/
nigelsampson 15y ago
It's interesting how it talks about how employees aren't loyal to companies, I think a lot of this is because most companies don't show much loyalty to their employees. Although it seems more likely in start ups. When companies show loyalty to their staff and not lay them off at the first sign of trouble, really think about compensation (so that employees don't have to consider changing jobs as the only way to get a pay rise) then they may see more loyalty from their employees.
- nknight 15y ago
  Loyalty is for people, not abstract entities. Notions of being loyal to a company are a management invention designed to control employees, nothing more.
  - phatbyte 15y ago
    Couldn't agree more.
  - dman 15y ago
    At least in very small companies you are working with and for a particular set of people. So loyalty and personal reputation definitely applies.
    - nknight 15y ago
      Loyalty to people != loyalty to a company. I'm well acquainted with the interaction between personal loyalty and employment. I've made career-altering choices out of personal loyalty that in a purely economic sense were not optimal. But that loyalty is tied only to people, not to any company. If I'm not in a job because of loyalty to one or more people, it's got to be out of either economic factors, or because I find the work interesting/fulfilling. The entity it's associated with is irrelevant.
    - dmix 15y ago
      If it's loyalty to a person, then asking them to stay (even if they aren't happy) for $50k is a weak form of loyalty. For stock ownership in a startup it makes more sense as they have to stay PLUS contribute to the companies success.
droithomme 15y ago
Yikes. What could possibly go wrong? Employees will see this as a deferred bonus. Applying to myself, let's say I make it to 4 years and am fired "with cause", maybe I had one too many sick days, before the fifth year. Maybe at 11 years and 10 months. That is going to be irritating. But the other thing is that employees will factor it into their perception of compensation. At the end of 5 years after the payout, unless there is something new put in place, or a $10k raise, it's going to seem like a wage cut at that point. That issue needs to be considered, anticipated, and addressed. Another problem is it likely knocks you into a new tax bracket that year, and possible kills off some subsidy you were getting with the new health care system so now you have to pay the full premiums, and various other similar issues, so all together it could end up being a bit less than one would get with it spread out over 5 years. Rather than a $250,000 one time bonus at 25 years, which may or may not be possible since it's unlikely this is going to be set up in a trust account, it would be better to see a tax deferred, legally guaranteed pension plan set up and funded. In 25 years $250,000 is going to be a lot less than it is now, in a retirement investment account it has the opportunity to grow. But, on the other hand, perhaps many people don't think in terms of retirement or taxes these days and are impressed by what seem to be large numbers and lottery payouts. If that's the case, then perhaps this is a more effective incentive than retirement benefits.
- BadCookie 15y ago
  My interpretation of the article was not that they would get a one time bonus of $250,000, but that they would get $50,000 every five years for a total of $250k after 25 years. I agree with your other points, though.
  - droithomme 15y ago
    Hm, that's a good point and would be a better system than what I was interpreting it to be since there wouldn't be the gut feeling of a wage loss after 5 years. BTW, I should clarify I'm not intrinsically opposed at all to anything in the article, I'm just pondering about the design of the system and its potential advantages and drawbacks compared to other possible incentive systems. Ultimately such human incentive plans are unpredictable in advance of being first done and thus the proof is in the pudding, it will be an interesting experiment to see carried through and see what the results are.
kabdib 15y ago
Apple used to have a sabbatical; at five years, you got six paid weeks off. Well, it's not 50K, on the other hand it was surprising how many people hung on until five years, took their six weeks off (often including vacation), then quit. It seemed to get rid of dead wood. I'm still not sure why.
- donaldc 15y ago
  It seemed to get rid of dead wood. I'm still not sure why. My guess would be that, those people who were no longer growing at Apple, after six consecutive weeks off, filling their mind with things other than working at Apple, realized they had stagnated and figured out something else to do. It's much easier to have perspective on a situation after spending a significant period of time away from it.
- checker 15y ago
  I think many people find it difficult to contribute significantly after they've lost enthusiasm for their work, becoming dead wood. Staying five years might be stretching it for them.
- mikeryan 15y ago
  5 years at once place in SV is pretty long. If you're getting itchy feet at 4 years you're probably going to wait the few months until the sabbatical kicks in so you can get the time off (or payout?).
- kirpekar 15y ago
  IBM and many HDD companies still have the sabbatical rule. 7 years of work-ex gives you 3 months of time off (but it has to be planned and approved well in advance)
- ChuckMcM 15y ago
  Sabatticals are an interesting thing. SGI, Tandem, Sun, Google for a while, all had sabbaticals after a period of time. HR people note that people often don't come back from them. I think that is in part because you do get to refresh a bit and think about things and ask really deep questions like "what do I really want to be doing with my time?" A lot of things change in 5 years. However, the idea of letting people take an extended break to recharge is a good one, if someone comes up with a good way to do that without losing employees it would be well received.
mapgrep 15y ago
"SIB is Schneider's third company. Now 30 years old, he started his first business, a retail mobile phone company, when he was 18... [In] November of 2008... SIB was born." The average period of ownership for his prior two companies was under 4.5 years, given that he took a break in between ("to learn to kiteboard, traveling to the Dominican Republic, Panama, Israel and Mexico"). One was sold, no word on the other. He's asking employees to stick with a job longer than he EVER has. And he's asking them to have faith that, if he sells again, the new owner will respect this bonus policy. I'd have zero faith in this. But then, unemployment being what it is, I probably wouldn't quit, either.
- cubix 15y ago
  I don't see that being a problem if there's a signed contract. It would be like any other liability if the company is sold.
  - mapgrep 15y ago
    I didn't see anything about a signed contract. A bonus is simply an incentive until it is paid and that incentive can be taken away at any time. Of course, these generally low wage employees are free to try and retain lawyers to argue otherwise, but I expect the cost of that would quickly overwhelm the value of the bonus.
  - a5seo 15y ago
    Nope, a contract wouldn't help if he did an asset sale, gave himself a dividend, and then shut down shop. They should get the funds placed in escrow.
    - A1kmm 15y ago
      Company directors generally have a fiduciary duty to creditors to ensure that a company is solvent. Paying a dividend knowing that it would result in the company being unable to pay its liabilities is therefore a breach of that fiduciary duty. However, even if there is a contract I bet it allows staff to be made redundant if the company decides not to do something without getting paid out, so that would be a possible loophole.
vaksel 15y ago
probably won't work. there is no real trust in employment...to a lot of people they'd just see it as an added incentive for the boss to fire you at the end of 4th year.
- wccrawford 15y ago
  I absolutely would expect it. There's no way I'd believe they'd see that sum of money and think, "Yup, it's worth it." Companies that DO pay me what I'm worth do so at the time, not a year later. And certainly not 5 years later.
absconditus 15y ago
Many of my coworkers have been with the company for 5 years or more. In many cases the reason for this is that they do not have many employment options because they are borderline incompetent.
sfaruque 15y ago
Slightly unrelated: CNN needs to work on their "in article" link placement (don't really know what it's called). I took a screenshot in case it's different for other users. http://i40.tinypic.com/nxt81.jpg http://i40.tinypic.com/nxt81.jpg I re-read that section twice trying to make sense of it...
- cperciva 15y ago
  I saw the same thing and was also confused. It looks like a section heading, so I went through trying to find the explanation of who was sleeping with whom in this company...
deleted 15y ago
[deleted]
wavephorm 15y ago
This sounds like a ghetto interpretation of a pension.
ticks 15y ago
I'm not really a fan of these game theory-style targets, they just bring out the worst in people. Being an employee at a business for a long time should be the result of an excellent environment, not from being bribed with a long term financial milestone.
- dos1 15y ago
  I didn't see this in the comments above, but the whole time I'm thinking to myself: 50k at the 40% bonus tax rate == 30k. That's still nice, but that's significantly less than if they just paid you that over the course of 5 years.
johnl 15y ago
It's just another form of stock options except cash always sounds better if the stock is going nowhere or your company doesn't have any stock to give. It's also an approximate 10% yearly bonus held for 5 years. I would rather have the bonus up front instead of the carrot on the string deal.
gregable 15y ago
I read this as: "you get an automatic $10k/yr pay cut at 5 years".
rachelbythebay 15y ago
Get it in writing and make sure it can't be taken away. Google had a leave policy after 5 years of tenure that they yanked during the great shrinking of 2008-9. You could go off for something like 9 months and your options would continue to vest. I think maybe even your health insurance stayed active, too. Then you could come back and keep on going. Apparently they had a problem with people taking leave and then never coming back. Instead of fixing the actual problem (people not wanting to return -- wonder why...), they took away the benefit. This was pretty crappy for those of us who were pretty close to it, or who had earned it and hadn't scheduled it yet.
freemarketteddy 15y ago
I wonder what the value of 50,000 dollars five years from now is in terms of today's dollars considering inflation ,another five rounds of QE and a probable economic crisis. Perhaps my odds are better if I just bought $2000 worth of silver and did absolutely nothing else.
wlievens 15y ago
That's not very different from stock with a vesting point, right? Except the amount you gain is predetermined.

58 points by kirpekar 15y ago

Will keep all the useless staff What do you do to keep the good ones that could get a job that pays $11K/year more and so in 5 years they would have $55K ?

scrrr 15y ago
Sounds reasonable. But there's also people that are skilled but dislike change. They will be rewarded and will feel confirmed in their belief ("it will be rewarded to stay on board") this way.
nfm 15y ago
I'm sure it's part of a larger strategy. Explicitly valuing staff retention means that he probably also recognises the value of company culture, group ownership, and so on.
theshadow 15y ago
There is something to be said about a lumpsum payment of $50k that is psychologically more attractive to people than the same about of money amortized over a period of 60 months. Extra 11k a year comes down to an extra $900 a month, which for a lot of people is not as psychologically impactful as getting a $50k payment. Smart strategy by the company.
- greenyoda 15y ago
  Unfortunately, getting the $50K as a lump sum could have negative tax implications. If it pushes you into a higher tax bracket, you could end up paying more tax than if you got a little bit each year. Plus, you'll have the disappointment of seeing much less than $50K after all the taxes (income taxes, social security, etc.) are withheld. Also, by having to wait five years for the money, you're giving up any possible investment gains and income that you could have made if you'd had the money earlier.
  - nknight 15y ago
    I'm not sure how easy this would be legally, but they might be able to set it up to drop most of the $50k into the employee's 401k. The employer + employee contribution limits are currently $49k/year, so even if the employee is contributing their $16.5k max, you could mitigate a hell of a lot of the taxes.
nknight 15y ago
Useless staff can still be fired, he's not offering them lifetime employment. And I've seen first hand the damage done by getting rid of the "mediocre" people who have been around for ages in favor of a new hotshot. Discontinuity and destruction of institutional knowledge has enormous hidden costs.

fennecfoxen 15y ago

Sounds a lot like stock options, but without the stock, and a much steeper "cliff" than the classic vesting schedule. I wonder how many people will stay 5 years, collect the (one-time) payout, then leave shortly thereafter?

fleitz 15y ago
That's kind of the point, to get them to stay for 5 years. It's an extra $10,000 per year in pay that is only payable if they stay 5 years. Most people leave for better pay, this mitigates that and will not always have to be paid. If they stay til 5 years and then leave after getting the cheque that's an extra couple of years. It's also a major negotiating point on salary raises. (eg. An employee of 4 years is more worried about the 50K than rocking the boat for an extra 10K raise). This offer like most perks is cleverly constructed to make an employee who is about to leave stay and think he is getting one over on the company by leaving the day after he gets his $50,000. (Which most employees won't actually do because they aren't sharks)

tomjen3 15y ago

I guess it makes sense if you have been there for, say, three years that you then stay an extra two years (you didn't already plan on) before seeking a job elsewhere. Considering that any other job would have to give you 25000 more, staying is properly the best offer. But really outside of that situation it wouldn't seem as an attractive offer. It is not difficult to imagine some other company offering you 10k more especially if you are hitting the first big milestone of 3-5 year professional experience (even if that measure is, at best, bullshit).

DrHankPym 15y ago
10K extra a year would financially be more expensive to invest than 50K five years later.
- msg 15y ago
  ? The future value of money is discounted by inflation and the opportunity cost of failing to invest. According to this inflation calculator for US, you would lose about $1000 just from inflation if you deferred your bonus for the five years from 2005 to 2010. "What cost $10000 in 2005 would cost $11067.95 in 2010." http://www.westegg.com/inflation/ http://www.westegg.com/inflation/

nigelsampson 15y ago

It's interesting how it talks about how employees aren't loyal to companies, I think a lot of this is because most companies don't show much loyalty to their employees. Although it seems more likely in start ups. When companies show loyalty to their staff and not lay them off at the first sign of trouble, really think about compensation (so that employees don't have to consider changing jobs as the only way to get a pay rise) then they may see more loyalty from their employees.

nknight 15y ago
Loyalty is for people, not abstract entities. Notions of being loyal to a company are a management invention designed to control employees, nothing more.
- phatbyte 15y ago
  Couldn't agree more.
- dman 15y ago
  At least in very small companies you are working with and for a particular set of people. So loyalty and personal reputation definitely applies.
  - nknight 15y ago
    Loyalty to people != loyalty to a company. I'm well acquainted with the interaction between personal loyalty and employment. I've made career-altering choices out of personal loyalty that in a purely economic sense were not optimal. But that loyalty is tied only to people, not to any company. If I'm not in a job because of loyalty to one or more people, it's got to be out of either economic factors, or because I find the work interesting/fulfilling. The entity it's associated with is irrelevant.
  - dmix 15y ago
    If it's loyalty to a person, then asking them to stay (even if they aren't happy) for $50k is a weak form of loyalty. For stock ownership in a startup it makes more sense as they have to stay PLUS contribute to the companies success.

droithomme 15y ago

Yikes. What could possibly go wrong? Employees will see this as a deferred bonus. Applying to myself, let's say I make it to 4 years and am fired "with cause", maybe I had one too many sick days, before the fifth year. Maybe at 11 years and 10 months. That is going to be irritating. But the other thing is that employees will factor it into their perception of compensation. At the end of 5 years after the payout, unless there is something new put in place, or a $10k raise, it's going to seem like a wage cut at that point. That issue needs to be considered, anticipated, and addressed. Another problem is it likely knocks you into a new tax bracket that year, and possible kills off some subsidy you were getting with the new health care system so now you have to pay the full premiums, and various other similar issues, so all together it could end up being a bit less than one would get with it spread out over 5 years. Rather than a $250,000 one time bonus at 25 years, which may or may not be possible since it's unlikely this is going to be set up in a trust account, it would be better to see a tax deferred, legally guaranteed pension plan set up and funded. In 25 years $250,000 is going to be a lot less than it is now, in a retirement investment account it has the opportunity to grow. But, on the other hand, perhaps many people don't think in terms of retirement or taxes these days and are impressed by what seem to be large numbers and lottery payouts. If that's the case, then perhaps this is a more effective incentive than retirement benefits.

BadCookie 15y ago
My interpretation of the article was not that they would get a one time bonus of $250,000, but that they would get $50,000 every five years for a total of $250k after 25 years. I agree with your other points, though.
- droithomme 15y ago
  Hm, that's a good point and would be a better system than what I was interpreting it to be since there wouldn't be the gut feeling of a wage loss after 5 years. BTW, I should clarify I'm not intrinsically opposed at all to anything in the article, I'm just pondering about the design of the system and its potential advantages and drawbacks compared to other possible incentive systems. Ultimately such human incentive plans are unpredictable in advance of being first done and thus the proof is in the pudding, it will be an interesting experiment to see carried through and see what the results are.

kabdib 15y ago

Apple used to have a sabbatical; at five years, you got six paid weeks off. Well, it's not 50K, on the other hand it was surprising how many people hung on until five years, took their six weeks off (often including vacation), then quit. It seemed to get rid of dead wood. I'm still not sure why.

donaldc 15y ago
It seemed to get rid of dead wood. I'm still not sure why. My guess would be that, those people who were no longer growing at Apple, after six consecutive weeks off, filling their mind with things other than working at Apple, realized they had stagnated and figured out something else to do. It's much easier to have perspective on a situation after spending a significant period of time away from it.
checker 15y ago
I think many people find it difficult to contribute significantly after they've lost enthusiasm for their work, becoming dead wood. Staying five years might be stretching it for them.
mikeryan 15y ago
5 years at once place in SV is pretty long. If you're getting itchy feet at 4 years you're probably going to wait the few months until the sabbatical kicks in so you can get the time off (or payout?).
kirpekar 15y ago
IBM and many HDD companies still have the sabbatical rule. 7 years of work-ex gives you 3 months of time off (but it has to be planned and approved well in advance)
ChuckMcM 15y ago
Sabatticals are an interesting thing. SGI, Tandem, Sun, Google for a while, all had sabbaticals after a period of time. HR people note that people often don't come back from them. I think that is in part because you do get to refresh a bit and think about things and ask really deep questions like "what do I really want to be doing with my time?" A lot of things change in 5 years. However, the idea of letting people take an extended break to recharge is a good one, if someone comes up with a good way to do that without losing employees it would be well received.

mapgrep 15y ago

"SIB is Schneider's third company. Now 30 years old, he started his first business, a retail mobile phone company, when he was 18... [In] November of 2008... SIB was born." The average period of ownership for his prior two companies was under 4.5 years, given that he took a break in between ("to learn to kiteboard, traveling to the Dominican Republic, Panama, Israel and Mexico"). One was sold, no word on the other. He's asking employees to stick with a job longer than he EVER has. And he's asking them to have faith that, if he sells again, the new owner will respect this bonus policy. I'd have zero faith in this. But then, unemployment being what it is, I probably wouldn't quit, either.

cubix 15y ago
I don't see that being a problem if there's a signed contract. It would be like any other liability if the company is sold.
- mapgrep 15y ago
  I didn't see anything about a signed contract. A bonus is simply an incentive until it is paid and that incentive can be taken away at any time. Of course, these generally low wage employees are free to try and retain lawyers to argue otherwise, but I expect the cost of that would quickly overwhelm the value of the bonus.
- a5seo 15y ago
  Nope, a contract wouldn't help if he did an asset sale, gave himself a dividend, and then shut down shop. They should get the funds placed in escrow.
  - A1kmm 15y ago
    Company directors generally have a fiduciary duty to creditors to ensure that a company is solvent. Paying a dividend knowing that it would result in the company being unable to pay its liabilities is therefore a breach of that fiduciary duty. However, even if there is a contract I bet it allows staff to be made redundant if the company decides not to do something without getting paid out, so that would be a possible loophole.

vaksel 15y ago

probably won't work. there is no real trust in employment...to a lot of people they'd just see it as an added incentive for the boss to fire you at the end of 4th year.

wccrawford 15y ago
I absolutely would expect it. There's no way I'd believe they'd see that sum of money and think, "Yup, it's worth it." Companies that DO pay me what I'm worth do so at the time, not a year later. And certainly not 5 years later.

absconditus 15y ago

Many of my coworkers have been with the company for 5 years or more. In many cases the reason for this is that they do not have many employment options because they are borderline incompetent.

sfaruque 15y ago

Slightly unrelated: CNN needs to work on their "in article" link placement (don't really know what it's called). I took a screenshot in case it's different for other users. http://i40.tinypic.com/nxt81.jpg http://i40.tinypic.com/nxt81.jpg I re-read that section twice trying to make sense of it...

cperciva 15y ago
I saw the same thing and was also confused. It looks like a section heading, so I went through trying to find the explanation of who was sleeping with whom in this company...

deleted 15y ago

[deleted]

wavephorm 15y ago

This sounds like a ghetto interpretation of a pension.

ticks 15y ago

I'm not really a fan of these game theory-style targets, they just bring out the worst in people. Being an employee at a business for a long time should be the result of an excellent environment, not from being bribed with a long term financial milestone.

dos1 15y ago
I didn't see this in the comments above, but the whole time I'm thinking to myself: 50k at the 40% bonus tax rate == 30k. That's still nice, but that's significantly less than if they just paid you that over the course of 5 years.

johnl 15y ago

It's just another form of stock options except cash always sounds better if the stock is going nowhere or your company doesn't have any stock to give. It's also an approximate 10% yearly bonus held for 5 years. I would rather have the bonus up front instead of the carrot on the string deal.

gregable 15y ago

I read this as: "you get an automatic $10k/yr pay cut at 5 years".

rachelbythebay 15y ago

Get it in writing and make sure it can't be taken away. Google had a leave policy after 5 years of tenure that they yanked during the great shrinking of 2008-9. You could go off for something like 9 months and your options would continue to vest. I think maybe even your health insurance stayed active, too. Then you could come back and keep on going. Apparently they had a problem with people taking leave and then never coming back. Instead of fixing the actual problem (people not wanting to return -- wonder why...), they took away the benefit. This was pretty crappy for those of us who were pretty close to it, or who had earned it and hadn't scheduled it yet.

freemarketteddy 15y ago

I wonder what the value of 50,000 dollars five years from now is in terms of today's dollars considering inflation ,another five rounds of QE and a probable economic crisis. Perhaps my odds are better if I just bought $2000 worth of silver and did absolutely nothing else.

wlievens 15y ago

That's not very different from stock with a vesting point, right? Except the amount you gain is predetermined.