Employer Insights

When is a Bonus Not a Bonus?

David McLaren Posted by David
min read
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Having worked In the UK for many years and having been used to the way things are done there, I thought I would flag some of the differences and similarities in the UK / Aussie system.

One of the biggest frustrations I found in the UK, was that once you had finally identified a potential suitable match for a candidate and organisation alike, things could quite quickly grind to a halt when it comes to the total rewards/remuneration package. No matter how thorough the initial brief on what exactly was on offer, the amount of times there was either something overlooked, by both candidate and/or organisation was astounding. Sometimes it was to the benefit of the prospective candidate and sometimes to the detriment. Over in the UK, the various benefits on offer can perhaps be more varied compared to Australia. Australia is generally a mix of base salary, + 9.5% super (for now) + 20 days annual leave. Throw in an additional bonus and possibly salary sacrificing options and you probably have all the different variables covered.

In the UK, packages are often broken down as follows:

  • Standard base salary

  • Possibly a car (what level and what happens when you leave the company) or car allowance

  • Pension which could have several different options in terms of what you contribute

  • Private health for either yourself or family membership

  • Days holiday which could also have a variable figure

  • Bonus

  • Possible membership payments (eg for the CA or CPA)

  • Sometimes a London weighting allowance

Having so many different variables potentially up for grabs, everyone was aware that there was sometimes ‘wriggle-room’ for the right candidate. This was where some of the consultants really were able to make a difference and obtain the right offer for the right candidate, to both the candidate’s and the hiring manager’s satisfaction.

Fast forward to what is now to my sixth year in Australia and I have realised that maybe whilst the variety of benefits on offer might be narrower, there is still flexibility. Base salary can always be potentially negotiated up or down. Knowing exactly those parameters is vital before we start wasting everyone’s time, including mine! The biggest ‘red flag’ though, is always when a hiring manager states the potential offer is base salary + super + the ‘usual’ benefits. ‘Usual’ benefits - what’s that?

I will use these definitions when clarifying total rewards’ packages:

  • Base salary means base salary not including super.

  • Package means base + super.

  • Total rewards package means base + super + any bonus potential + any car/allowance if there is one.

So, bonus potential; let me outline the varieties that I have heard in recent years. To be honest, there is not an awful lot of difference between the UK and Australia, but it’s something definitely worthwhile to think about.

Guaranteed bonus (there is such a thing but not common). Here, candidates are ‘guaranteed’ X% of their package (base or final package). X will differ depending on your work level. It could also be that as long as you start work at 8.00am and finish at say 5.00pm, you are almost guaranteed the payment.  However, it might be based on your own performance, regardless of how well the company/division is doing. If you are doing a good job, you receive your bonus but if you are deemed to be underperforming, you don’t.  

Bonus based on divisional and/or Corporate performance and/or individual performance. Often a sliding scale percentage, but also quite often mixed with individual and company performance e.g. if your division and/or the corporate performance has been above a certain threshold, and your individual contribution has been high/exceptional, then you could be looking forward to at least some of the bonus payable. Again, if 1 or 2 of these parameters are not met, that could result in some or all of the bonus potential not being paid.   

When is the bonus paid?  At the end of the financial year generally… but what happens if you hand your notice in beforehand; do you still get paid? Sometimes. Some bonuses are payable just by being an employee at a certain date, whilst others you only get paid on the basis you haven’t handed in your notice. This is quite often one of the things a job seeker can overlook. Clearly, this is also sometimes a difficult thing to clarify with your direct manager if you are thinking about moving on.

When did you start with the organisation? By commencing with the organisation within six months of a bonus period entitlement, do you forfeit all the potential bonus on offer? For example, for those commencing in February 2017, is their bonus payable for the June 30 2017 year, as they didn’t qualify? So does this mean that the first bonus payment could be June 2018? Is it a sliding scale or an all-or-nothing policy?

As mentioned above, is a bonus based on base salary or on total package amount? If there is a bonus, what amount, on average, has been paid in the recent years? I would rather have 5% of something, rather than 25% of nothing. Is there a way you can find out and does it depend on the seniority of the role?

So, a real range of variables, which could really make a difference on whether you accept a role or not, or when you give notice to resign. What would also be really helpful, is that before you engage with a recruitment consultant, to either source talent or if you are job hunting yourself, you determine exactly the structure of the rewards’ package is, or what exactly you are earning. It could save us all, a lot of time.