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I have received the offer letter from a company recently. In the section pertaining to Performance Incentive following is mentioned

Performance Based Incentive
Over and above the basic salary, you shall be eligible for a minimum performance based incentive of xyz which will be paid as per the Company’s internal policy. The incentive is contingent on your individual and overall profit performance of the company and shall be subject to terms and conditions as the Company may decide.

However, the Employee shall have no right to incentive or time-apportioned incentive if he is no longer employed by the Company or is under notice (whether given by the Employee or the Company) at or prior to the date when a incentive might otherwise have been payable.

It states that I should receive a minimum amount of xyz, but in another line it also says that it would be contingent on my individual and overall profit performance of the company and it also is subject to t&c. These two statements appear to be contradicting. On one hand it says that I will receive a minimum guaranteed amount and on the other hand it says that it will be based on the profits. Am I missing something here? If I am to ask for clarifications regarding this clause, what all should I ask?

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    Never consider a bonus as part of compensation when deciding on a job offer. There are many circumstances when bonuses are not paid. If the company has a bad year, they may up the performance requirement for bonuses, pay smaller bonuses or not pay any bonus. Bonus schemes can be eliminated by the company at any time. The wording her is vague enough that there are no guarantees. – HLGEM Jul 12 '17 at 14:34
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    All they are saying is, IF you get a bonus, it will be minimum xyz. Again, IF. – PagMax Jul 12 '17 at 14:48
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    I've spent 15 years in large US corporations with performance-based incentives. For me, xyz is a percentage of base salary, what you get paid is xyz multiplied by some factor (from 0 to 1.5ish) that reflects your performance, then multiplied by some factor (from 0 to 1ish) that reflects the company performance. I've been paid more than xyz on two or three occasions, in others years as little as a tenth of xyz (never zero, though). I've never had less than a top or second-top rating, so it's usually company performance scaling xyz. Quite how that's worked out, nobody knows. – strmqm Jul 12 '17 at 15:16
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    @strmqm HP was famous for paying 0 in the Fiorina years. We would get the company results email talking about what a great quarter we had... but we didn't meet the (non-published, and I honestly don't think they actually existed) goals, so no payout. – Gabe Sechan Jul 12 '17 at 15:23
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    It does not say you should receive a minimum amount of anything. It says you are eligible to receive a minimal amount of xyz, subject to certain terms. Which means, you could meet all those terms and still not get it, because being eligible to receive something doesn't mean you'll actually get it. – iheanyi Jul 12 '17 at 18:55
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You're eligible for a bonus, if you and/or the company/department you work for meet some criteria. If that happens, it will be at least xyz. Except depending on the exact wording of the bonus policy it may even come in under that.

What's this worth? $0. There's a billion ways for the company to game it, in one company I worked at it was a joke where the numbers the company had to meet weren't even published. Assume it will never pay out when comparing offers, and be pleasantly surprised when it actually does.

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    @JoeStrazzere I appreciate what you're trying to say (and if I felt that way about a specific company, I'd definitely not work there). But as a rule, I assume every company is going to game it. If it isn't a fixed, legally required payout then I assume its not going to happen. – Gabe Sechan Jul 12 '17 at 15:21
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    Most companies have bonuses like this and quite a few do pay it out. Example: mine. But this advice is still good. – 2rs2ts Jul 12 '17 at 15:50
  • @GabeSechan My experience has been completely the opposite. Why would a company set itself up to fail by making me expect something they don't expect to deliver? That would be a pretty stupid and short-sighted company. If I can't convince them that it's worth paying me the bonus to retain me as an employee, that's on me. And if the company doesn't reward its employees fairly for their efforts, I'm not staying anyway. – David Schwartz Jul 13 '17 at 15:17
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    @DavidSchwartz Stupid and short sighted is the perfect description of most companies and high level management I've ever met. – Gabe Sechan Jul 13 '17 at 15:18
  • @GabeSechan Great to find out as quickly as possible so you can move on. I too spent decades working with such people and getting nowhere. My life completely turned around just a few years after I started working with people who are not like that. – David Schwartz Jul 14 '17 at 16:08
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The statements are not contradictory at all. They're merely stating that if your performance qualifies you for participation in the bonus plan then you'll get a minimum of xyz. They reiterate thought that it's merit based so if you're fired or quit that you can't get the bonus.

It's really fairly standard with merit-based bonus plans. They just want to make sure that you know that you're not entitled to it and you can't demand it if they decide you don't deserve it. Basically, the "xyz" is a meaningless number since you're not entitled to it. It's more for information at this point.

  • Doesn't this mean that if OP performance makes him eligible for a bonus AND if company profits are good, then OP will get xyz ? That both performances need to be above expectation ? – OldPadawan Jul 12 '17 at 14:27
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    not contradictory, but deliberately obfuscated. – Retired Codger Jul 12 '17 at 14:30
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    @OldPadawan That's exactly what it means. 2 things need to happen. There needs to be a pool to draw bonuses from. That's based on company profits. Once the company has decided how much to put in that pool, then they decide on eligibility. That's where individual merit comes in. – Chris E Jul 12 '17 at 14:39
  • thanks, I was not sure I had properly understood :) – OldPadawan Jul 12 '17 at 14:41
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    @RichardU I don't consider "eligible" an obfuscation. It's widely understood to mean, "Possibly, but not necessarily." – jpmc26 Jul 12 '17 at 23:28
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It states that I should receive a minimum amount of xyz, but in another line it also says that it would be contingent on my individual and overall profit performance of the company and it also is subject to t&c. These two statements appear to be contradicting. On one hand it says that I will receive a minimum guaranteed amount and on the other hand it says that it will be based on the profits. Am I missing something here?

This is pretty standard language. They aren't guaranteeing that you will be paid anything.

Instead, they are saying that if you meet your individual performance goals and the company meets its overall profit goals, they will pay you at least "xyz".

If you are a poor enough performer, you might get less or nothing.

If the company does poorly enough, you might get less or nothing.

In some companies (including several where I worked), if you do well enough and the company does well enough, you might get more than "xyz" - sometimes a lot more. (You might wish to ask about that).

And of course, company policy regarding bonuses can be changed at any time.

Consider "xyz" to be your "target" bonus, that you can expect to receive if everything goes according to expectations.

If I am to ask for clarifications regarding this clause, what all should I ask?

For most of my career, bonuses were part of the offer package.

I always asked about the company's past performance and past payout record. My thinking was that I could control my own performance, but had limited control over company profits. If the company had a history of always hitting their profit goals that is good - if they had a spotty record there, I'd want to know about it.

You might also wish to ask about the formula used to calculate bonuses. And you might wish to ask of the formula would permit you to earn more than "xyz".

I always consider bonus just one of many factors when I made my decisions.

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    I recently joined a company that had paid healthy bonuses (sometimes up to 20% annual salary) consistently for 20 years. My first year - no bonus. If you're happy with the salary, the position, and the company - take the job. A bonus is just that - a bonus. – thebluefox Jul 12 '17 at 15:26
  • At best, that says they might pay him xyz should those requirements be satisfied, not that they will. – iheanyi Jul 12 '17 at 19:00
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All the other answers are good, i.e., don't count on it. I'll add though, that if you have another offer that's just as good except for the possibility of the bonus, that might be a deciding factor. But I presume you have tried to judge the culture of the company. Not all will taunt you with something they don't intend to give. Most realize the value of keeping their people happy.

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