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There is a company bonus program which only certain individuals above a certain level are eligible for. This year, because of good performance, the company would have to pay out a huge bonus. The bonus calculation essentially says that if the company beats the financial performance target for the year by a factor of 108%, then the bonus paid out would be double what the targeted bonus payout is.

My boss thinks it would be a good idea to save some of this favorable performance for next year, because the bonus calculation resets next year and we will likely have a more stringent target. I think this is morally wrong because the target was set in the beginning of the year and everybody had to agree to it. Now the company is taking back what it said and isn't going to pay out the full bonus.

As a Finance professional, I understand that in these economic times, our first priority is that the company continues operating and if the bonus payment will hinder this then we shouldn't pay it out. I also think that it's important to keep your word to employees so that they keep working as hard or even harder to achieve our target next year. I'm really on the fence with this as I'm also in the bonus program myself and this would mean my bonus would be lower than it could've been.

Should I be thinking about this a different way perhaps or should I just go with it?

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    What do you hope to achieve? Do you have the power and authority to do anything? If not, then your question is a moot point.
    – joeqwerty
    Commented Jun 19, 2023 at 20:00
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    Did they put any of this in writing? Commented Jun 19, 2023 at 20:24
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    Are you being asked to make a presentation which says "we achieved 107% of our target" when in reality you achieved 109%"? Or are you being asked to defer some sales income into next year to make your achievement 107%? More specifically are you being asked to actually falsify accounts? Commented Jun 19, 2023 at 23:46
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    Wait, so this year's performance has been so good that people can expect huge bonuses, yet there is a real risk the company won't be able to continue operating next year because of the same bonuses? That doesn't add up. Are the finances of the company in such a dire state that it is one big bonus payment from bankruptcy, or is the concern for continued operation more like a made-up excuse to somewhat try to justify reducing the bonus?
    – TooTea
    Commented Jun 20, 2023 at 21:47
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    Are you being asked to actually do anything (e.g. fiddle numbers, move revenue in to the next fiscal year, etc?).
    – DaveG
    Commented Jun 22, 2023 at 19:45

4 Answers 4

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If you are being asked to explicitly lie to your co-workers, then I wouldn't. I would also not be willing to stand by and be silent if Management was going to lie to the team.

However...

"We knocked it out of the park this year, we could pay the full bonus, but looking at the forecast, next year is looking a bit rocky. We think it's better that you get some bonus this year and some bonus next year than have a large bonus this year and nothing next year"

That isn't immoral. I would be hesitant about trusting the word of a company who did that and would absolutely want to see it in writing so that next year, regardless of financials, that bonus gets paid out and there's no wiggling out of it.

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    The trouble with this is, it could turn into "We kept some profit back and so didn't pay the full bonus. Next year everything tanked and even with the profit we kept back nobody is getting a bonus.". Also, some people will leave between now and next year. Are you going to send them the bonus they would have got if you hadn't fiddled the books? Commented Jun 19, 2023 at 23:44
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    @DJClayworth - Oh I completely agree that I wouldn't trust that promise as far as I could throw it and would want to see it iron-clad in writing - I'm just saying that if they are upfront about it, what they are doing isn't in-of-itself immoral. Commented Jun 19, 2023 at 23:53
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    It's still immoral because the bonus was doubled. He's being asked to move some of it to next year to avoid that doubling. Commented Jun 20, 2023 at 1:48
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    As an employee I would read that as 'we will only give you half of what we promised now and next year we are going to decide what to do then' and act accordingly. Companies do that but it is breaking a promise no matter what they claim to do next year.
    – quarague
    Commented Jun 20, 2023 at 9:46
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    As another employee I'd read this as "I better push to get my full bonus this year and then start applying elsewhere to get out before things get rocky". I.e. it may not be immoral, but it's going to backfire on the business.
    – mkdir
    Commented Jun 20, 2023 at 19:06
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There's actually two parts to this: Morally, this is wrong. Your company agreed to a bonus structure and should damn well pay out. And if you help them not do so (whether secretly or in the open), then you are not only behaving immorally, you are also screwing over your co-workers.

Secondly, is the bonus spelled out in anything that could be considered a contract where you are? Because if it is, then the company could also have a legal fight on it's hands.

As an aside: a company that gets caught not paying out on earned bonuses isn't going to have many good employees left in short order. People REMEMBER that kind of thing, and your bosses will NOT like how things go if word gets around that bonuses didn't get paid out properly.

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    It also assumes staff will still be at that company next year to get their "re-scheduled" bonus. Maybe they were planning on retiring, or need to leave the job to relocate to another part of the country for ... reasons, or they get run over by a bus in 6 months time - do they they still plan to pay the second half of last year's bonus to that ex-employee (or their widow / widower) in a year's time? I'd rather have the double bonus now and none next year than half now and who knows what in 12 months time - pretending they're doing staff a favour by withholding it is absurd..
    – mclayton
    Commented Jun 20, 2023 at 19:26
  • There is a "Notification of Award" letter and a "Annual Incentive Compensation Plan" document that is written like a legal contract, however, the more I read it, the less the word "legally binding" seems to hold any weight. It uses terms like, "The Committee shall have the exclusive power to, determine whether, to what extent and under what circumstances Awards may be or canceled, forfeited or suspended." And "To the extent within its discretion, the Committee (or its delegate) may amend the terms and conditions of any outstanding Award."
    – Evan G.
    Commented Jun 21, 2023 at 3:20
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If this is the United States then this sounds like a nondiscretionary bonus and altering the payout is most probably illegal.

This kind of bonus is based on productivity and your employees are expecting to receive it for good work. Since you have an algorithm in place to receive the bonus it's even clearer that it's nondiscretionary. This kind of bonus is considered wages earned and has to be reported for tax purposes.

Examples of nondiscretionary bonuses includes... bonuses based on a predetermined formula, such as individual or group production bonuses;

reference: https://www.dol.gov/agencies/whd/fact-sheets/56c-bonuses

The IRS considers bonuses to be “supplemental wages” and levies a flat 22 percent federal withholding rate. IRS reference

If the employees "doubled their bonus" then they have substantial reportable income that needs to be reported to the IRS.

This is not a discretionary bonus- one that's given regardless of productivity- for example a Happy New Year bonus for all employees. The employer has the option of rescinding that kind of bonus for any reason. That is not the same rule for nondiscretionary bonuses.

In the state of California, if an employer does not pay the promised nondiscretionary bonus then the act is illegal:

Workers can sue their boss for failing to pay them non-discretionary bonuses they are owed. A bonus is considered to be non-discretionary (and must be paid) if the employer (1) promised it and (2) can no longer alter the size or timing of the payment without breaching the contract. https://www.shouselaw.com/

You may want to contact a lawyer and/or report the deception to the IRS or your government's taxing authority.

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  • It sounds like this might not apply in OP's case (but IANAL!), because the company isn't contemplating just skipping the payment, they seem to want to adjust the profit (or whatever metric they use) downwards so that the bonus is not triggered. In other words, just changing the inputs to the algorithm, not changing the algorithm itself or overriding what it says. There are many fully legal methods of "creative accounting" commonly used to shift some profit from year X to year X+1.
    – TooTea
    Commented Jun 23, 2023 at 11:51
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Does your employer have an "ethics hotline"--this would be the time to use it. Do not compromise your integrity. By the way, that sounds like a terrible place to work, in my opinion; maybe it would be a good time to search for new opportunities.

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    No ethics hotline.
    – Evan G.
    Commented Jun 21, 2023 at 3:26
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    Before using an internal ethics hotline, find out who's on the other end of that phone.
    – G_B
    Commented Jun 25, 2023 at 4:58

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