Discretionary Bonus

[Mr^B]

1. If you receive a discretionary bonus as part of your contract, were you given an indication as to what percentage/amount it would be when signing up for the job?

2. Did/Does it meet your expectations?

3. Have you ever NOT received a discretionary bonus even though you, personally, had a productive/goal-meeting/box-tickingly good year?

Had a few awkward conversations with team members who don't appear to understand the word "discretionary" and "indication".

Curious as to how these work and what experiences people have outside the two organisations I've worked for where the following answers apply;

Job #1
1. No (I clearly should have asked, but I didn't)
2. N/A
3. Yes

Job #2
1. Yes, given an indication in % terms
2. Yes - started off just about meeting expectations and has got progressively better than expected
3. No

 

[dowie]

1. very rough indication, previous job had quite a high portion of variable compensation though it was clearly defined in the contract, having a discretionary bonus was new to me and salary was a much larger component in that instance

2. slightly disappointed, was hoping that good performance could increase it a bit but LOL nope, not happening in a non-revenue generating role, the small percentage goes up by a bit to another small percentage as the boss still has a fairly small and finite pot to divide among team members - it was (relatively) small in % terms compared to what I was used to but the overall pay was OK so meh...

3. yup, not performance related though just a company wide freeze one yeah for [reasons]... then bumper profits reported so a whole load of BS... obviously some quite angry meetings/demands after that one for the next pay review in order to make up for the obvious BS they pulled

 

[TallPaul_S]

1. No - just that there is a bonus scheme (mid year, end of year), but no figures have ever been given at interview/job offer stage
2. yes - seeing as the expectation was based on no solid figures given and what had been previously paid out
3. yes - due to company performance

The word 'discretionary' says everything anyone should need to know about the bonus - if the company sees fit it doesn't have to pay any bonus. I see any bonus scheme as a bit extra I wouldn't normally have gotten but I certainly wouldn't expect to receive anything.

 

[Rids]

Current Role
1. Yes - indication was given at the interview stage as a % range.
2. No - last year fell significantly short despite a very strong year, I made my disatisfcation known and steps were taken to correct this.
3. No

Last Job
1. Yes
2. Mostly
3. Yes - in my last year there I had a fantastic year taking over the work of the London Financial Controller and assuming 60% of it into my role for a 3% pay rise and no bonus at the end of the year. Apparently London Finance salaries were higher than Manchester so they cut all London bonuses.

 

[HangTime]

Old thread but not time sensitive so worth a reply based on my last perm role:

1) Yes
2) Yes given I knew what I was expecting, although I felt it wasn't weighted heavily enough on individual performance (more below)
3) No, personal performance bonus was always paid. There was one year there was no company performance bonus however.

To elaborate on #2, the issue I had was the difference in personal performance bonus between a "Successful" rating and "Exceeds" was only 2.5%. By contrast, the difference between "Marginal" and "Successful" was huge because you would forgo any bonus including company performance bonus (up to 22.5% in some cases) if you were not successful. Additionally, you had situations where someone would have a great year but get less bonus than prior years when they performed worse because of the bigger weighting on company performance (to be clear I completely understand that company performance has to play into it, you can't have the company making big losses and then shelling out phat bonuses). The feedback I got as a manager was that it wasn't worth busting a gut for the sake of 2.5%, not much more than a grand after tax etc is taken off. For a couple of people the bonus / pay review was actually a demotivator because they felt they should be getting more. My recommendation to HR was that they widen the gap between Successful and Exceeds bonuses so that strong performers could see more of a difference.

 

[Freefaller]

1. If you receive a discretionary bonus as part of your contract, were you given an indication as to what percentage/amount it would be when signing up for the job?

2. Did/Does it meet your expectations?

3. Have you ever NOT received a discretionary bonus even though you, personally, had a productive/goal-meeting/box-tickingly good year?

Had a few awkward conversations with team members who don't appear to understand the word "discretionary" and "indication".

Curious as to how these work and what experiences people have outside the two organisations I've worked for where the following answers apply;

Previous role:
1. Yes full disclosure with a maximum cap of what I could get.
2. I never made the maximum as that was down to a profit margin percentage of the entire business - it was a little annoying as I had more than exceeded my targets, but also it has to be a business-wide thing, but it doesn't motivate you to work as hard.
3. Yes - and it is quite demoralising - but then you know that no one else (at least as far as I know) did either.

In another previous role:
1. Yes but it was public sector and as such very small and almost not worth it.
2. No - and what's more consultants that weren't directly employed got significant bonuses and pay despite doing teh same role, they just happened to be a 3rd party employee. Part of me thinks "fair enough they made the choice to work for that employer" but then part of me thinks, "they do the same job as me and I work harder and get less... why bother?".
3. Yes but it didn't bother me too much as the overall package was greater than the bonuses would have added (health care, free travel, final salary pension and a huge amount of time off and flexible working).

Current role:

1. I was told up front and in my contract what I could get an what the cap is. 20% or £20k whichever is the smallest.
2. Yes, it's very generous for the work I do.
3. not yet.


Oops I didn't realise it was an old thread! But @HangTime posted and thought it was an interesting topic

To elaborate on #2, the issue I had was the difference in personal performance bonus between a "Successful" rating and "Exceeds" was only 2.5%. By contrast, the difference between "Marginal" and "Successful" was huge because you would forgo any bonus including company performance bonus (up to 22.5% in some cases) if you were not successful. Additionally, you had situations where someone would have a great year but get less bonus than prior years when they performed worse because of the bigger weighting on company performance (to be clear I completely understand that company performance has to play into it, you can't have the company making big losses and then shelling out phat bonuses). The feedback I got as a manager was that it wasn't worth busting a gut for the sake of 2.5%, not much more than a grand after tax etc is taken off. For a couple of people the bonus / pay review was actually a demotivator because they felt they should be getting more. My recommendation to HR was that they widen the gap between Successful and Exceeds bonuses so that strong performers could see more of a difference.

Completely agree, it's a tough one, the company has to be doing well overall to offer the cash to pay the bonuses, but if your department (as a head / MD of a business unit) you outperform, you and your team were not always guaranteed to achieve the rewards you deserve. Case in point, we achieved as a business unit 12% profit over last year's budget and delivered a significant portion of cash to the bottom line - we basically carried a lot of the business... And we got ****** on bonus ;/ pay rises / budget for the following year. We had a few people leave as a result - I didn't over promise, we were open and honest across the year and I supported their decision to leave, it's hard not to.

What's more cutting was that some of my other directors were clocking up £10k of expenses and some of their projects were failing and were using the business wide profits to plug the gaps in the projects. SO frustrating - and yet some of them kept getting away with it. That's why I left after 4.5 years and took a £30k pay cut!

 

[Rroff]

As it is a kind of interesting topic - I think employers underestimate how even a small gesture can go a long way sometimes albeit that shouldn't be an excuse to slash bonuses.

 

[Semple]

1. No our bonus percentage is at the discretion of our manager
2. In most cases i would say it met my expectation
3. Yes have had the odd year of no bonus if the company / department hasn't met targets - blow has normally been softened with stock options and salary payrises.

 

[Semple]

As it is a kind of interesting topic - I think employers underestimate how even a small gesture can go a long way sometimes albeit that shouldn't be an excuse to slash bonuses.

Yeah it's a funny one, i'm unsure whether i'd prefer a bonus, or an equivalent in payrise. In theory with the extra money being added to pay, it would mean if the company doesn't perform so well one year then you're at least making what would have been a bonus into your regular pay. But hard to see the wood from the trees when it comes to working out whether your pay is competitive then.

 

[randomshenans]

We have 2 levels of bonus. I should get 12% as a level 1. That level 1 = 80% of that 12% and uses the: did the company hit their targets? If yes you get 100% of that 12%, if they hit 110% you get that etc. if lower same etc.

Then you have a team/ performance based for the last 20% - did you perform as expected? if at 100% you get 100% of that 20%, if lower/ higher etc.

Makes sense? ha

 

[RobHu]

1. No
2. No
3. No

^ First proper job, thought bonuses would be a bit better than they ended up being. It was just off the back of the GFC so probably why.

1. Yes
2. Yes
3. No

1. No
2. No, but close on occasion
3. Yes (pandemic related)

 

[HangTime]

Yeah it's a funny one, i'm unsure whether i'd prefer a bonus, or an equivalent in payrise. In theory with the extra money being added to pay, it would mean if the company doesn't perform so well one year then you're at least making what would have been a bonus into your regular pay. But hard to see the wood from the trees when it comes to working out whether your pay is competitive then.

If by "equivalent" you mean the same in pounds shillings and pence, unless you are planning to leave in the short term a pay rise is massively preferable:

• Compounds over years i.e. if you get a pay rise then the next pay rise you receive will be against a higher base
• Uses to drive other benefits like company pension contributions, value of holiday days sold/in lieu
• Guaranteed and more predictable
• Easier to prove income for mortgage applications etc

The only reason I can think it might be preferable to get a bonus would be if you were planning to leave and then a £10k lump sum is better than a £10k pay rise to be paid over the next 12 months. Even that is diminished a bit by the fact there is often a delay on bonuses, if you resign before it gets paid then you don't get it etc, but you'd e.g. be able to leave after say 6 months with the extra £10k in pocket whereas on the pay rise you'd only have received £5k of it (plus a bit of extra pension) by that point.

The most recent job offer I received had an interesting model whereby you have a guaranteed segment of the bonus, that is then added to your salary for the next year. Essentially that means a guaranteed pay rise in addition to bonus, unless you are rubbish of course.

 

[dlockers]

I work with tons of millennials who DGAF about the word discretionary. They compare every years gross value and if they don't get a higher gross salary than the prior, legitimately go around saying "this year was basically a pay decrease". This is irrespective of if they had strong base pay increases.

 

[HangTime]

I did a training course once that had a module on diversity in recruitment/management and one segment was looking at "ageist" factors. There were some myths that were debunked around what traits/expectations the young might have, but one thing that stuck with me was that research showed millennials do expect quicker progression/reward than their predecessors.

 

[HACO]

I did a training course once that had a module on diversity in recruitment/management and one segment was looking at "ageist" factors. There were some myths that were debunked around what traits/expectations the young might have, but one thing that stuck with me was that research showed millennials do expect quicker progression/reward than their predecessors.

It's probably because they are under significantly more financial pressure than their older counterparts were at that stage of their career, given that wages have stagnated in the US/Europe for about two decades.

 

[HangTime]

Could be, although you'd have thought wage stagnation would be impacting generation X as well, I mean surely if wages are stagnating then all age groups are feeling financial pressure right now, even if they didn't when they were the same age as millennials are now. In other words, why do Millennials expect quicker progression today [or lets say 5 years ago whenever the research was conducted] than older people do at the same point in time? GenX will have mortgages to pay, kids to feed etc. Those born towards the end of Gen X may not have entered serious employment until around the year 2000, so would presumably be heavily impacted by wage stagnation too.

 

[HACO]

Could be, although you'd have thought wage stagnation would be impacting generation X as well, I mean surely if wages are stagnating then all age groups are feeling financial pressure right now, even if they didn't when they were the same age as millennials are now. In other words, why do Millennials expect quicker progression today [or lets say 5 years ago whenever the research was conducted] than older people do at the same point in time? GenX will have mortgages to pay, kids to feed etc. Those born towards the end of Gen X may not have entered serious employment until around the year 2000, so would presumably be heavily impacted by wage stagnation too.

GenX have mortgages that they took years ago when cost of housing was a lot more reasonable compared to Millennials who are trying to rent/buy now. Cost of childcare is also through the roof, whereas children of Gen X are old enough that they don't have that level of expense anymore. It's very well documented that Millennial have it much worse compared to older generations, and they didn't exactly enter their careers at a good time, now with two "once-in-a-lifetime" crisis at the beginning of their careers. And simply that at the beginning of your career you get a lot less now (adjusting for inflation, in terms of purchase power) compared to what Gen X got at the beginning of theirs, so Millennials are starting from a much worse place trying to drag themselves up. Millennials also have student loans which reduces their pay even further.

Obviously those born towards the end of Gen X have a lot more in common with Millennials than those born at the beginning, given that these are descriptive terms. It's not like one generation is all the same through their period, it ends at a certain date, and then we have another generation. It's all a smooth transition.

 

[HangTime]

Good points well presented. A couple of of elements to consider:

• Millennials are having kids latest than their predecessors (average age of mothers has risen from 27.7 to 30.7 between 1991-2019), so in spite of rising childcare costs, their cumulative spend on childcare by a given age (when children are early/midway through childcare, obviously not by the end) may not necessarily be that much higher (e.g. a 30 year old has probably needed less years of childcare than a 30 year old did a couple of decades back)
• From what I can see, real wages in the US have been relatively flat over the past 20-40 years rather than diminishing. I would acknowledge housing provides a skew on this i.e. house prices to income ratio has deteriorated significantly.
• Anecdotally, and this may not stand up to scrutiny, there is a perception that millennials expect luxury trappings a lot sooner. They want smartphones, 4k TVs, laptops, latest games consoles etc etc costing hundreds of pounds and frequently replaced at a young age. They frequently take up subscription/finance services. So arguably some of that 'financial pressure' is of their own making compared to yesteryear that would make do and mend with very few expensive items, and those they did have would be expected to last a very long time. Perhaps they want progression in the workplace sooner to fund that lifestyle in addition to rather than solely down to funding the external hygiene factors. It's difficult to get much empirical evidence on this sort of thing though, so there could be an element of rose-tinted spectacles, maybe back in the day the young workers were spending as much on booze and fags as the current crop are on gadgets.

 

[HACO]

Good points well presented. A couple of of elements to consider:

• Millennials are having kids latest than their predecessors (average age of mothers has risen from 27.7 to 30.7 between 1991-2019), so in spite of rising childcare costs, their cumulative spend on childcare by a given age (when children are early/midway through childcare, obviously not by the end) may not necessarily be that much higher (e.g. a 30 year old has probably needed less years of childcare than a 30 year old did a couple of decades back)
• From what I can see, real wages in the US have been relatively flat over the past 20-40 years rather than diminishing. I would acknowledge housing provides a skew on this i.e. house prices to income ratio has deteriorated significantly.

The reason Millennials are having kids later in life is the costs though. They are waiting to earn more so that they can afford to have children. They always say that when asked. Housing is definitely a big part of that.

• Anecdotally, and this may not stand up to scrutiny, there is a perception that millennials expect luxury trappings a lot sooner. They want smartphones, 4k TVs, laptops, latest games consoles etc etc costing hundreds of pounds and frequently replaced at a young age. They frequently take up subscription/finance services. So arguably some of that 'financial pressure' is of their own making compared to yesteryear that would make do and mend with very few expensive items, and those they did have would be expected to last a very long time. Perhaps they want progression in the workplace sooner to fund that lifestyle in addition to rather than solely down to funding the external hygiene factors. It's difficult to get much empirical evidence on this sort of thing though, so there could be an element of rose-tinted spectacles, maybe back in the day the young workers were spending as much on booze and fags as the current crop are on gadgets.

I hear this a lot and never seen an actual study demonstrate this properly. Sure, younger people spend more on tech, but they also spend less on other things, e.g. much less car ownership these days, they buy Ikea/Amazon furniture instead of expensive ones, typically buy more generic clothes rather than designer, etc...



By value, less than a third of luxury goods market is consumed by millennials and Gen Z. Gen X and older account for ~70%. And there are more millennial and Gen Z compared to the old in the world (half the people in the world are under 30). I think this whole "avocado toast" and "latest iPhone every year" thing is just a myth.

Average household debt of millennials compared to older generation isn't that different either. So millennials aren't drowning themselves into debt to buy the latest iPhone and PlayStation, at least not more than other generations.



I think we're going off topic though

 

[HangTime]

Do they have any stats for prior years on % luxury sales? I can see that gen Y is increasing share of luxury goods 2016-17 but I guess what would be useful for comparison would be the same data for an equivalent cohort in say 1997 and/or a trend over time so see if it's different than yesteryear. Or perhaps a better(?) stat would be %age of income spent on luxuries i.e. are people spending more or less on luxuries than in the old days (if costs of living are rising, you'd expect them to be spending less on luxuries to compensate, due to reduced disposable income).

To steer it back slightly more on topic, I suppose the challenge here is that if we are hypothesising that the reasons millennials are expecting more rapid progression is because of cost of living, then this is an external factor unconnected to their work. So they want more rapid advancement for the same level of performance compared to older generations, which is presents a challenge for remuneration. You don't want to be discriminating against older people who are performing as well as younger people by giving them smaller rises/bonuses, so you need a way to manage those expectations.