
Keep your job for five years, get $50,000 - kirpekar
http://money.cnn.com/2011/11/08/smallbusiness/bonus/
======
mapgrep
"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
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.

~~~
a5seo
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.

~~~
sethg
When the startup I worked for was acquired, I got a retention bonus dangled in
front of me as an incentive to stick around; one of the terms of the contract
is that if I am laid off or if the company has a change of control, then the
entire bonus gets paid off immediately.

Of course, I am confident that no matter what happens, the acquiring company
will have the cash lying around to pay off my bonus. A small consulting
firm... not so much. Regardless of the contract terms, the firm can always
declare bankruptcy, in which case the employees expecting their $50K payout
can stand in line with all the other creditors.

Yeah, escrow sounds like a good idea for a case like this. (Would escrow be
enough to shield the money in case of bankruptcy? My Google-fu is not
helping.)

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droithomme
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
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
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.

------
nigelsampson
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
Loyalty is for people, not abstract entities. Notions of being loyal to a
company are a management invention designed to control employees, nothing
more.

~~~
corin_
Couldn't disagree more, and I would have thought HN would be one of the few
places not to see that view. With startups the founders and early employees
often (not always) see their company/product(s) very fondly, the natural
response to having created something yourself if you care about it.

And it doesn't have to be a startup, it can be any job that you become
attached to. I assume it's a mix of pride in what you have achieved and the
parenting instinct.

Your suggestion is insulting to many, many people who really do care about
what they are working on.

~~~
rpwilcox
It's great that you're caring about the things that you do, but what's a
corporation's primary goal? _increase shareholder equity_

 __Especially __, I would think, in companies that received millions of
dollars of investment from outside sources (VCs). (In exchange for amounts of
control by those same investors)

Pride of creation is one thing, but I would caution you against using this as
a blinder: the corporation is not (and can not legally be) loyal to you.
[Edit: unless you provide more shareholder equity then the next person... and
then only until the person who increases shareholder equity more than you
comes along]

------
sfaruque
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>

I re-read that section twice trying to make sense of it...

~~~
cperciva
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...

------
kabdib
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
_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.

------
fennecfoxen
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
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)

------
absconditus
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.

------
rachelbythebay
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.

------
vaksel
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
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.

------
ticks
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
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
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.

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

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

------
tomjen3
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
10K extra a year would financially be more expensive to invest than 50K five
years later.

~~~
msg
? 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/>

------
nobody3141592
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 ?

~~~
theshadow
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
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
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.

------
wavephorm
This sounds like a ghetto interpretation of a pension.

------
freemarketteddy
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.

