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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",
by 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 agoMy 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 agoHm, 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.
- nknight 15y agoHow the employees choose to see it is irrelevant if the conditions are clearly spelled out. That said, it would not be surprising for a court to force partial payment if the "cause" is particularly flimsy or the timing excessively suspicious. Good faith is an implied part of contracts in almost all jurisdictions (even if it's not explicitly called that), and evidence of a party acting in bad faith, even if the letter of the contract was adhered to, may result in damages being awarded.
- dctoedt 15y ago> it would not be surprising for a court to force partial payment if the "cause" is particularly flimsy or the timing excessively suspicious. For that kind of upside, an employee might well roll the dice with a lawsuit, even if it were his or her case that was flimsy. Some years ago, a client let an employee go (for poor performance) about a month before one of the annual stock option cliff vests. The employee sued, claiming that the company wanted to keep her from getting her next vest. The client settled the lawsuit, and soon afterwards, changed its ESOP so that the first vest would still be a cliff at one year, but then subsequent vesting would be quarterly. That way, there was much less incentive for disgruntled former employees to file lawsuits of that kind (and no one else ever did).
- mr_contractor 15y agoWhat's a typical acquisition compensation package for a non-founding engineer being acquired by Facebook, eBay,etc? Anyone know?