How to ask about performance-related bonus

Question

I once received a job offer that included a bonus based on "company and individual performance." I wanted to have a bit more specific information about the bonus in order to evaluate the level of compensation being offered. I told the HR person who was working with me that I understand that the bonus is subject to performance and therefore not necessarily the same from year to year but I would like a rough estimate so I could better evaluate the offer. She told me that she couldn't do that. I didn't want to prod too hard but I rephrased my question a couple of times but I was unable to get any information about the bonus besides that it was "generous."

In the end I did accept the offer and the bonus was indeed generous. Once I became an employee, it turned out that the formula used to calculate the bonus was completely transparent. I found it strange that they would hide this information from potential hires. Is it common to withhold this kind of information from candidates after giving an offer? Is there anything I can do differently in the future in order to draw out some more useful information?

Update

To be clear, I completely understand that exact numbers are likely impossible to provide. I'm not particularly interested in learning the exact formula that is used to calculate bonuses. What I really want to know is the approximate order of magnitude of the bonus. Are we talking 5% of salary or 35% of salary?

Answer 1

Is it common to withhold this kind of information from candidates after giving an offer?

Pretty much every company I have ever worked for had complex, ever-changing formulae for calculating bonuses. And almost without exception, the bonus depended on factors outside the hiring manager's knowledge and control.

My most recent company based part of their bonus structure on individual performance, which was rated by the direct manager, but then "adjusted" by the next-level-up manager, and the general manager who actually owned the overall budget.

The adjustments were made so that the dollars given out by the department fit within the assigned pool of budget money - most often 3% of the department's salaries. That meant that if I wanted to give someone more than 3%, I had to give someone else less than 3% - even if everyone did terrific work for the year.

The other part of the bonus was based on division goals and attainments (both of which were completely opaque at the department level), and company goals and attainments (again, completely opaque).

Thus, the only honest way to express bonuses would be something like "part hitting your written goals, part making your boss happy, and part magic".

Individuals were put on bonus plans based on a percent of their salary, depending on their job level. For example, some were on a 10% plan, others on a 15% plan. While those were the target percentages, you could always make more than target, or less than target. The target percentages were always discussed, and included in the offer letter.

When asked about bonuses during interviews, I always said that part was based on individual achievement, and part on company achievement, and left it at that. On several occasions, I was able to say something like "and last year, the company did well, so we ended up getting 115% of the company portion of our bonus plan".

I never heard from candidates that they wanted more details, or that they wanted a written formula. If they had asked, I wouldn't have been able to offer more, as HR advised us not to get into the details, because they were subject to change each year.

I do feel this was frustrating since I like to know all the details, but entirely common in my experience.

What I really want to know is the approximate order of magnitude of the bonus. Are we talking 5% of salary or 35% of salary?

Every company where I have worked was able to state the percent of your salary you were eligible for, as a bonus.

If that information isn't given to you when salary and benefits are discussed prior to an offer letter, then you should certainly ask.

Answer 2

Bonuses tend to be discretionary, meaning the company has the discretion to give you a bonus (for example at the end of the year) or not. This information is typically included in the offer letter. In my experience, the more details that are included in the offer letter, the more binding the contract becomes. Given the discretionary essence of the bonus, I understand why the company might not want to put in the offer letter the calculation details.

You could try to connect with other employees at the company to try to understand what percentage of base compensation they had received in the past as a bonus. In many cases the industry could have common practices that get replicated in similar companies belonging to that industry. If you find other company examples from the same industry, that could be a guideline as well.

Lastly, going back to HR and asking for precedent data could work. For example, without asking for the calculation mechanics or specifics, you could ask how many people or what percentage of people were paid a bonus in prior years, and what percentage of base salary was that bonus. This can give you some indications, but I think it is better to ask peers and existing employees rather than HR at the company.

Answer 3

Are we talking 5% of salary or 35% of salary?

I have seen a few ways bonuses were handled.

1) a percentage of salary, the percentage varied but was usually mentioned before starting work. This was less a bonus than a raise though and tended to be around the 20-30% mark.

2) a months salary, which often was not mentioned and was a one off payment.

3) one off bonuses for achievements, these can be for anything work related, mostly they were for added certification. Some companies will give a one off bonus and/or a small increment in pay if you complete a certification relevant to their needs. Quite often they will pay for some or all of your training as well.

At the end of the day, there is no hard and fast rule, I've seen bonuses given just because the boss had a baby. I think the smaller the company the more arbitrary the process.

The best way to ask, is to utilise the only leverage you have. Tell whoever is concerned that you need to know or you can't evaluate the renumeration properly and won't take the job. Asking after accepting weakens your leverage.

Answer 4

It doesn't look like anyone here answered either of your questions.

How to ask about performance-related bonus?

You did the right thing by starting with the HR person. You ask as clearly as you can, and maybe in more than one way if it is not answered, in case your question was not clear or the manner in which you initially asked is not acceptable. For example, "How much will my bonus be?" is very different from "What is the current policy for bonuses, and can you give a common range for my pay grade/level?"

Is it common to withhold this kind of information from candidates after giving an offer?

Yes. If the policy changes before you are hired, the employer may be bound to the offer made to you verbally or otherwise. This creates a mess with HR. You mentioned it was a well-known and well understood formula, so maybe your HR person was new or hesitant about how to handle it, but it seems under those circumstances the information should be released. Still, there may be laws or rules HR is aware of that give cause to withhold the information.

Is there anything I can do differently in the future in order to draw out some more useful information?

During your interview with the hiring manager you can ask why the HR person would not answer the question, or even ask directly about the bonus policy. You have to be careful that you do not seem to be asking about your manager's compensation. Most hiring managers are aware of your compensation package, so asking about how the bonus works is reasonable. Likely, they will refer you to HR but it also may surprise you (especially if, as you say, the bonus formula is well-known). The approach here is more like, "HR won't tell me much about the bonus structure. Do you know why? Can you tell me anything about it?"

Answer 5

What I really want to know is the approximate order of magnitude of the bonus. Are we talking 5% of salary or 35% of salary?

Sales/commission based jobs are more likely to have higher bonuses. Older more established industries are more likely to have lower bonuses.

If your performance can be quantified in some way (sales) that will how they determine it. The fact that HR couldn't give you a definitive answer means it is likely a somewhat arbitrary assessment of your performance from your boss. There is usually a range the boss has access to, and can mark you up or down based on performance, with the possible limit that the boss might need to meet a certain average or has a certain cap (meaning there's either only so much they can give you, or that if do give you more they need to take some away from another employee). Certain departments might get higher bonuses than other departments, and certain employees might get nothing.

It's likely a process that your coworkers and other managers know very well and can tell you all about how it worked last year etc. But that's different from HR telling you anything, because what if you didn't get a bonus? Sure they could tell you it's not automatic and based on performance, but you could misconstrue what they said later. HR's job is to protect management, not give helpful information to new recruits. If they feel like they are spilling company private data, they won't say anything. After you've started you've likely already signed appropriate NDAs and your coworkers may not feel under the same restrictions as HR is.