
Bonuses Are the New Raises - luu
http://blogs.wsj.com/atwork/2014/08/27/bonuses-are-the-new-raises/
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cryoshon
You mean that bonuses are the new raises for employees who work in a few
narrow white collar fields? Sure. But really, the "new raise" for most of the
proletariat is leaving your salaried job which won't give you a raise because
"money is tight" (despite record profits) and finding a new job which will pay
you %10 more. No loyalty from the employer begets no loyalty from the
employee; this labor situation favors the employers, which is why it is so.

If we're talking realistically, there is no "new raise", and the majority of
workers (especially hourly workers) don't get substantial bonuses whatsoever.
There's yearly wages losing out to inflation and higher cost of living, and a
stagnation in wage increases that has gone on for 30 years, on the broad view
of things.

The article also mentions an "economic recovery" while failing to mention that
labor engagement as a percentage of the population is at a 30 year low even
when controlling for demographic factors. It's as though the author is living
in a fantasy land where only positive information is taken into account when
drafting an article.

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encoderer
Amen. Real wage growth stalled in this country since the 1970s. Corporate
profits through the roof in same time frame. Stock market, what, 5x?

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djur
I appreciate bonuses for what they are, but salary is always more important to
me than a bonus. An offer of $x/yr salary and $b/yr bonus is less valuable to
me than $x+n/yr salary, even if n<b and the bonus is characterized as a sure
thing.

My budgeting has to be based on my salary, not my bonus, and my monthly budget
defines my standard of living. What I can spend on housing, food, and
entertainment depends on salary, as does how much I can expect to put in
savings every month.

Over the long term, sure, bonuses can contribute to that baseline. They can go
into discretionary expenses like vacations, home improvements, new furniture
and gadgets, and they can help bolster savings and investments. But depending
on bonuses when making long-term financial commitments is more of a risk than
I'm willing to make.

And don't even get me started on equity/stock options/etc. That stuff is
usually granted in terms that are heavily weighted toward the employer's
benefit. Work should be compensated with money, not investment opportunities.

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encoderer
How is equity granted in a way that favors employers? I'm curious what you
mean.

The caveat I'd add to your first point is... bonuses for me have been an
important part of accelerating savings and retirement. I personally do not
define my financial success by my month-to-month standard of living but rather
by my net worth. And in those terms, a bonus dollars spends the same.

Of course, though, that in the hypothetical case you were offered $10,000
raise or $10,000 bonus, certainly the raise is better. But that's a strawman.
A more interesting analysis would be _where is the line drawn_? Is a 5k raise
better than a 10k bonus? I'd probably take the bonus in that case, honestly,
because time value of money and all. So where is the line drawn?

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djur
Long vesting periods, and the fact that, well, what you get at the end is an
investment in your employer. So it's like getting money, except you don't get
it for a few years, and someone else invests it for you.

As far as 10k bonus vs. 5k raise, sure: if you're being offered 10k now versus
5k over the next year, and you expect to receive another 10k next year in lieu
of the same 5k, then you're coming out ahead. But the case I'm talking about
is when you're getting a compensation offer including a bonus, in which case
you're choosing between 5k over the next year versus 10k in a year (maybe).

A signing bonus of some sort, where you're receiving an immediate guaranteed
payoff (or even a guaranteed payoff at some point in the future), is a
completely different beast than a performance bonus as part of a compensation
package.

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encoderer
An RSU is no different than cash bonus. It's taxed essentially as cash when it
vests so at that moment you can sell all the stock and treat it as cash. In
fact, that's what I would advise with RSUs. Options, i think it can be better
to hold for a year and see long term cap gains rates.

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busterarm
Changing jobs is the new raise.

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allegory
This, a million times.

In the UK, by changing jobs a few times, I managed to get from £14k to £46k in
4 years :-)

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purringmeow
How did that happen? Did you need more XP for the higher-paying jobs and got
it from the previous ones?

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_random_
They simply ask what is your previous salary and offer a 5-25% increase. You
skills are simply a pre-requisite, but they don't define your starting salary.
Depending on your risk appetite and potential background checks one can lie
and get a fairer deal (the firm is always protected since they have a notice
period).

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ethanhunt_
Scheduled cash bonuses and multi-year stock vesting schedules are a great way
to retain employees who don't want to work for you anymore. I have no clue why
companies think this is a good idea.

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endtime
s/Scheduled cash bonuses/Raises/ and I don't think you'd take the same
critical tone.

I work for Google, and a significant chunk of my comp is in stock. I was
awarded an additional $N of stock over four years this year, and I just
considered it a raise of $N/4.

~~~
jonknee
Yes, the point being that if you started to hate your job there's a good
chance you'd stick around to the next vesting period. The same happens with an
annual bonus, no one wants to leave before the bonus checks come out. The
Valley likes stock, Wall Street likes bonuses (funny in a way).

Update: it also means you can stay at the job all year for the bonus/stock and
then get laid off right before the end of the year. It's deplorable.

~~~
scottm01
Maybe Wall Street is made up of "grunts" who understand the value of cash and
properly discounts the promise of paper profits later!

That said, like earlier posters I can only budget around my base salary. I
would of course prefer that "guaranteed" bonuses come in the form of base comp
paid every check. If you want to incentivize me to create shareholder value
and stick around; offer a generous ESPP.

~~~
tcoppi
Personally I wouldn't use an ESPP at all. You've already got your current job
invested in the company, why would you want to put more eggs into that basket?

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pcl
If you have the free cash to tie up in an ESPP, I generally think they are
worth doing. They usually let you buy shares at a 15% or so discount of the
lower of the price on the vesting date, or the price on the initial offer
date. This is typically over either a 2-year or 6-month look-back period,
although I've seen other time periods as well. Some programs even let you
automate that automatic-sell rule.

So... if you're playing it conservatively, you can just sell the shares on the
day that they are granted to you, thus realizing a guaranteed 15% increase on
whatever percentage of your salary you can put in the program.

There is some risk that if the company goes bankrupt, you could lose the
amount invested. But I'd guess that ESPP programs are pretty senior in the
debt pool, and generally management doesn't want to piss off its employees any
more then absolutely necessary during a bankruptcy proceeding.

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jonknee
Having compensation be arbitrarily controlled by management makes it easy to
tweak your numbers in a hurry. End of the quarter approaching and sales are
still soft? Sorry "team member", no bonus this time. Just working on "proving
yourself" and you'll be getting a bonus in no time!

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like_do_i_care
Bonuses - the single incentive that turns colleague against colleague, after
all, it is not enough to get a bonus, but if you can make out your colleague
under delivered, maybe you can grab a share of their potential bonus pie slice
too.

See this every day in a large Investment Bank. Bonus chasing bastards do not
protect or grow the brand, they just ensure short term decisions remain the
order of the day.

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seanflyon
Any system that incentivizes having coworker under deliver is a bad idea.
There is no reason bonuses have to fall in that category and in my personal
experience they never have. Where I have worked bonuses we bases on a
combination of personal performance, team performance and company performance
so you got a bigger bonus if your coworkers did well.

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gopalv
Variable pay is also paid in bulk at the end of the year.

There are people I know who just struggle through to stick around till that
pay day, particularly when the winter days are long and painful to get through
at work.

That works for retention for a certain mind-set.

For someone like me, my last job triggered the right impulses.

By having quarterly review cycles - keeps you on your toes (with the extra
management overhead of going through the reviews/budgets etc).

Someone around you was getting a raise every quarter - next time it could be
you ... just buckle down for 3 months.

Plus they gave promotions in role 3 months before the raise.

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colanderman
_winter days are long and painful to get through at work._

??? Winter's the best time to be employed, at least in moderate climates. It's
freezing outside, and inside there's the glow of a warm terminal.

 _Summer 's_ when I can barely keep myself working. You can actually get
outside and enjoy life.

~~~
ianstallings
The short days of winter make some of us gloomy unfortunately.

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colanderman
Ah OK. I forgot about Seasonal Affective Disorder. I wonder what causes humans
to have such polar-opposite reactions to the seasons?

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jobu
There was a great TED Podcast called "The Money Paradox" that talked about how
poorly money works as a motivator for creative professions:
[http://www.npr.org/2014/04/04/295368808/how-much-does-
money-...](http://www.npr.org/2014/04/04/295368808/how-much-does-money-
motivate-us)

~~~
Iftheshoefits
It has always seemed to me that "I love that I get paid to do what I'm
passionate about!" is in most (clearly not all) instances either a form of
sweet lemon rationalization or else a kind of expression of stockholm
syndrome.

That I am passionate about something does not imply I ought to be compensated
less for it than I otherwise might be and, no, providing a space merely for me
to do what I like is not "compensation." Employers _love_ that there are so
many people for whom "money is a poor motivator." It assists them in keeping
the imbalance that exists stable (or growing).

Also, that paradox really only applies broadly to a very special kind of
person, and generally only to people who are in professions for which a
substantial minimum income is the general rule. I also suspect it's only true
for a certain range (e.g. an additional 5-15% might not be of interest, but
start talking about 20% or more of an increase and that gets to be another
discussion altogether).

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djur
I love doing my job, and in a Star Trek-style socialist paradise I'd gladly do
the same job even without differential compensation versus other options. That
said, as a class-conscious worker in a capitalist system, I would never accept
job satisfaction in lieu of fair pay.

I did take a pay cut for a while to work at a startup, but that was a choice I
made based on the expectation that once the financial situation changed the
founders would do right by me (and it did, and they did).

~~~
JoeAltmaier
Somebody said to me in graduate school "You take the best offer you get,
somebody else is determining your future." She took the job she wanted. What's
wrong with that? It's not all about the money.

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Iftheshoefits
"You take the best offer you get, somebody else is determining your future"
generalizes: "You take any offer (of employment), somebody else is determining
your future." Both are fairly vacuous tautologies.

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JoeAltmaier
Be as cynical as you like. But its still possible to keep looking until you
find something that fits your priorities instead of signing up for the first
big bank that makes a big offer.

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forgotAgain
This is the only way we're going to encourage those on top to be super-
productive and provide for the rest of us. Be happy for what you have or there
will be no gruel for you anymore.

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Iftheshoefits
Since when were bonuses measures of merit or performance? It's more likely
they're measures of company financial performance (in the case of the net
pool), and the political whims of a manager (in the case of individual
distributions).

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ianstallings
I think a better plan for retention and performance would be ownership plans
of some sort. Equity, options, stock purchasing plans, employee ownership
plans, etc.

