An Employeer’s New Bonus Scheme
post # 334 — March 20, 2007 — a Careers post
Here’s another reader question, from “D”:
For the last nine years I have worked for a sales and marketing firm. Almost every year I have received “Incentives†and “Bonuses†(of varying amounts) for the work I do. The “Bonus†is from a pool of funds paid to my company by my client. The “Incentive†is paid directly from my employer.
This year the company is taking a 12% “administration fee†(pre-tax) from the bonus and incentive monies. I’ve been in this business for over 20 years and have never heard of such a thing, let alone experience it first hand.
The oddity of this—to my thinking—is that someone who receives a $1,000 bonus pays $120 for the cost of being paid. Someone who receives $3,000 pays $360 and so on up the scale. Another way to look at it: My client paid the company almost $1,000,000 in bonus. My company is taking almost $120,000 in “fees†from its employees (and the employees are paying the tax as well).
So, my questions are (a) Have you ever heard of such a thing in any business? And (b) Isn’t it odd that the employee would pay a federal and state income tax on what the company is taking out as an administration fee? (In other words, we are paying the company’s income tax before them; at least, that’s the way it seems to me.)
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D, I never expect to be surprised at the complex payment schemes that firms devise, and I’m rarely shocked that firms would put in place self-serving systems that adversely affect their employees (or independent subcontractors, in other instances.) If it’s the deal they offered at the beginning, and employees voluntarily accepted that deal when they came in, then so be it.
However, it’s the overnight change in the mutual understanding that would trouble me if I worked where you work. As you point out, a 12% administration fee burden on employees is a sizable sum, and if it were to be “imposed†without explanation and consultation, I’d expect a revolt. (Unless it’s the same in every competitive firm.)
I’m enough of a capitalist to say employers are allowed to structure their pay offer any way they want to. But I’m also enough of an idealist that I, personally, wouldn’t continue to work at a place where the mutual trust was broken in this way.
What think the rest of you?
Louise Berto said:
Without knowing the specific industry practices of the writer, this smells really fishy to me (and that’s an insult to fish). I don’t know what the compensation split is for D, the writer, but if, like many sales people, the his/her compensation is a mix of base, bonus and incentive, with the bulk of it in bonus and incentive, then their firm has cut their compensation by 12%. Do they have a signed employment agreement? If so, a unilateral cut like this is probably illegal, as well as unethical, and could merit a challenge to the labor board. As a long time executive recruiter, I have heard of hundreds of bonus incentive plans, and I’ve never heard of a 12% admin fee.
posted on March 20, 2007