Q: I am expecting a bonus in January or February. I have begun job hunting but very slowly and cautiously. The bonus is for our efforts in 2020, not 2021. However, I have heard that my employer has “pulled” bonuses before when an employee has given their notice and is expected to resign.
What do you think?
A: Year-end bonuses are often paid to employees in the first quarter of the year, following the period of measurement. An employer wants to determine how the company performed and often, a company has not “closed the books” until late January or early February of the following year. Additionally, a company has to calculate payouts. Typically, employees who have worked for the company a portion of the year, receive a pro-rated amount. Marginal performers may receive nothing.
You are smart to be thinking about this now. Most employers have language in their bonus plan document which protects their interests. The plan document may even say “The company reserves the right to make all final decisions with respect to bonuses, the payout amount, the timing and the eligibility.” As long as an employer has a reasonable and legally defensible approach, the employer is probably within their rights to distribute the bonuses based on tenure, level, performance or some other meaningful criteria. Employers do need to ensure that they are not inadvertently rewarding some groups over others. As an example, if the average percentage given to female managers is 10% vs. male managers is 15%, there may be a problem.
Bonuses typically do reward past performance however, employers are also trying to attract, retain and motivate employees with a myriad of compensation tools. If you announce that you are leaving and your bonus has not yet been paid, there is a good chance that you will not receive your bonus.
I have seen employers pull bonuses when they learn that an employee is leaving. I would suggest that you delay your resignation until you receive the bonus. Further, I recommend that if you receive the bonus, move it to another account. In a small number of situations, I have seen an employer reverse the deposit. If you move it to another account, or withdraw the funds, it would be difficult for your employer to be able to reverse the deposit.