Source
r/personalfinance•
DBoken

New Job Offer: Base no Bonus vs Lower Base w Bonus

Employment

A classic question - but most responses I've seen have the Base2+Bonus to be equal or close to Base1 where its an obvious answer...

I have an offer at the same company for 170K with 10% bonus OR 175K with no bonus. So the on bonus earnings is decently higher than just base. edit to add: The thing is, this is a scale up and they don't have any bonus structure in place yet, so my manager would have to figure out an agreeable bonus structure.

Any thoughts?

edit: in the country I live in, bonus is taxed as income

Posted Jan 6, 2022, 12:55 PM UTC · edited

817
tastygluecakes​•

This is a strange offer, with the two base salaries so close together.

It tells me the company doesn’t put a lot to value behind the bonus (maybe not high likelihood of paying out in full?)

Unless the bonus is substantial and highly likely, I would almost alway opt for higher base pay. That’s the foundation for raises, and perhaps a future bonus on a larger number.

27
No-Tangerine161​•

(maybe not high likelihood of paying out in full?)

This right here.

I once left a job with base+RSU to take a job with base+bonus+bonus. The new job theoretically paid about 15% more and came with a better title (but at a smaller company).

On one of the post-interview calls when we were discussing terms, the hiring manager at the new job told me he "fully intended" for everyone to get the full amount of the bonus (after I expressed my concern that the language of the offer letter made one of the bonuses discretionary). I also expressed to him that I wouldn't be staying if the bonus wasn't paid up to the full amount in the offer letter.

Well, guess what happened? The discretionary bonus paid out at 80% AND the non-discretionary bonus also paid 80%. The hiring manager may have "intended" for the bonuses to pay out, but he knew the company didn't usually pay 100%.

So I called my previous manager, gave my 2 weeks and went back to my old job. Moral of the story: know your worth and watch out for variable compensation unless you know the exact terms of how it's calculated.

5
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1
Werewolfdad​•

Do you want $5k or maybe $17k?

Realistically, the offers are close enough that I would weigh things like benefits, culture, job description, etc more than cash comp if its the same company this may not apply, unless the jobs are with different teams or something

10
grokfinance​•

Agree with this. The difference is so small. Go with the company that offers better benefits and whose culture/people you liked better when you interviewed.

4
WantToRetireSomeday​•

Completely agree. Distance / travel time to and from work to home? Have to look at the whole package these days.

3
Werewolfdad​•

I realized i glanced over the "same company", so the latter part of my comment probably doesn't apply (unless its with different teams)

6
WantToRetireSomeday​•

Dang, I too missed the ‘same company’ part.

4
Particular-Earth-453​•

Figure out what the terms are to get the bonus. Normally I’d say guaranteed pay is better than bonus but in this case the bonus potential is a lot higher than the salary difference, and the salary is high. But you need to understand what you have to do to actually get the bonus - is it discretionary, are there defined goals you can achieve, is it dependent on the company as a whole, etc.

5
DBokenOP​•

Since I'd be the only bonus employee, I don't think they know what the terms to get the bonus are yet - I believe I will have to set them up with my manager, It's likely discretionary as its not a sales role

3
Onepocketpimp​•

Yeah but get those outlined. That will be the real determining factor of which way to go

5
Particular-Earth-453​•

Yea you have to understand how that works before you decide. I’m not in sales either, but I’ve had three different bonus structures. The first was based 50% on my individual goals and 50% on the company profit. The second was completely subjective with no defined goals, which obviously was problematic. And now it’s based 100% on my individual goals. So to make a better decision you have to really understand what the structure is. If it’s just “oh it’s however we feel at the end of the year” then that sucks.

3
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3
No-Tangerine161​•

Higher base pay gives you increased accessibility to a raise that could become equivalent to the base with bonus.

Also, some other benefits are calculated off base pay. Most of companies I've worked for match 401k contributions up to x% of base salary. Same thing with ESPP: You can set aside up to y% of base for stock purchases. Higher base means you get more of those benefits.

1
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2
Delini​•

they don't have any bonus structure in place yet

Unless they can put objective and measurable criteria in your contract, the bonus doesn’t actually exist.

They’re playing a shell game, and the bonus is an empty shell.

I’d reject both offers if they can’t nail down a definition for your bonus by the time it comes to sign the contract, and instead find a company that doesn’t need to play games.

2
PeonOfIndustry​•

It's so close in Money that I wouldn't use that as the deciding factor....

Work life balance, culture, fit, all that other stuff is what you should be looking at to make your choice.

1
ikeavinter​•

If it's the difference of only $5, I'd take the $175 base. As the bonus is not guaranteed each year. It can be adjusted or you won't get it. Plus if you ask for a raise every year and get something, you'll bypass that bonus.

1
Anustart15​•

If it's the difference of only $5, I'd take the $175 base.

That sounds like more of an argument for the bonus structure. Worst case scenario, you are only out $5k and you have reason to be disgruntled (which gives you leverage with the company), best case scenario, you are up $12k.

Plus if you ask for a raise every year and get something, you'll bypass that bonus.

Is there a reason to think they couldn't get raises still if they take the salary+bonus offer? In addition, the bonus also goes up since it is based on a percentage of their base salary, so their salary would theoretically grow quicker.

1
ClickClork​•

Is the bonus based on individual or team performance? If team, ask how often the bonus has been hit over the last 5 years, you need a sense on how likely it is for you to acquire said bonus.

1