It’s the most wonderful time of the year.March is the month when many companies pay employees their annual performance bonuses.The beginning of the year is also the most common time for people to change jobs.If you are in that job changers category, be careful.Make sure you understand your company’s policies around bonus payments before saying anything about your intention to leave.
I can’t tell you how many times I’ve had someone come to me in devastation or anger when they realize, after giving notice of their resignation, that they are no longer eligible to receive the performance bonus that they waited around for.I’ve had people tell me they believed that because they worked through December 31 and the bonus was a reward for last year’s work, the company legally has to pay them.This is usually not true.I’ve also had people tell me that they planned their last day to be after the payment date for bonuses so that they can collect the payment before they go.They believe that if they are employed by the company on the date that bonuses are paid, then the company legally has to pay them.This is also usually not true.
If you are planning to leave your job and counting on getting that bonus before you do, make sure you do your research before saying anything.
First, know what type of bonus you have.Most people have a “discretionary” bonus plan.This means what it sounds like - it is at management’s discretion to pay you.Or not.Even if there are formulas, guidelines or targets for how the bonus is calculated, the company can choose not to pay it, for any reason.Most discretionary plans, in addition to saying that management can use whatever criteria they want, will specifically say that the employee a) needs to be employed on the date that bonuses are paid (not earned), and b) that if the employee gives notice of resignation, he/she is not eligible to receive any discretionary bonuses even if he is employed on the date that they are paid for others.
Next, understand the motivation behind paying bonuses.Many employees believe that annual bonuses are a reward for their work in the prior year.Companies encourage that thinking by setting annual targets and prorating bonuses, so that if you start a job mid-year you are only eligible for a portion of your total target.But while the quality of your last year’s work will be factored into setting your bonus amount, once the year is done, there’s nothing for your company to gain or lose from what happened in the past.So it’s in your manager’s interest to direct bonuses to the people that he expects to rely on in the next year.Bonuses are really always paying it forward.Usually, managers are working with a finite pool of dollars that they have been given from which to pay the bonuses.It makes sense for them to give more dollars to the people they want to motivate to do great work in the future.And it means they would rather not give any dollars to you if they know you are leaving.Every dollar given to someone who is walking out the door is a dollar taken from someone who the manager needs tomorrow.So even if your manager appreciated you and is a nice, fair person, his first priority is to take care of the employees who are sticking with him.
If you are on a commission plan or another formula-driven, earned bonus structure, these dynamics might not apply to you, and you may have the right to be paid out your incentive pay even after giving notice.But many commission plans do have some language (usually near the bottom of the document) that looks a lot like the language in discretionary plans, saying that management reserves the right to change the plan at their discretion.
Most importantly, you need to read your bonus plan.All of it, especially the fine print!You can ask your HR department to clarify in writing anything that isn’t clear to you in the formal written plan.Ideally of course, you should do all of that reading and research when you first join a company or first receive a new bonus plan, not when you are planning to leave.A bunch of questions about under what circ*mstances you will get paid out a bonus after resigning would probably raise some red flags and serve as a strong hint that you’re thinking of leaving, don’t you think?
Which brings me to my last point, what to do if you’re thinking of leaving but are not 100% sure that you will.Don’t. Say. Anything.Most employees want to be honest with their boss about what they’re thinking.They feel like as soon as something is a possibility, they “owe” it to their company to give a heads up.Remember, just as your company will not feel that they morally owe you a bonus if you give notice, you don’t owe your company a window into all of the possible decisions you might make in the future.Keep it to yourself, and this includes any applications to grad school, a potential move for a spouse, or other life changes that you may be considering.(Women, this also includes pregnancy - if you can wait until after receiving your bonus to share your awesome news, definitely wait!Some people will unfairly form their own views about your future commitment to work once they know you are having a baby.)
So when in doubt, just don’t mention it, or you risk having your manager allocate fewer bonus dollars your way because they will see you as less of a sure bet than the guy next to you who they are confident is staying through the next year.Remember, they are working with a finite pool of dollars, and they are betting on the future, not rewarding for the past.
The golden rule is, whenever possible, stay mum on your plans until the money hits your bank account.
When it’s not possible to wait for that bonus before giving notice, it’s still important to be aware of your company’s obligations so you don’t make decisions expecting to get money that isn’t coming.In those cases when you just can’t wait and need to give notice, remember to negotiate! Ask your new employer to cover all or part of the bonus that you are giving up.Ask your current employer to pay all of part of the bonus if you agree to deliver key transition work or to be available to train your replacement hire. Be aware of what’s due to you, but also don’t hesitate to ask for more. Good luck!
