Ask LH: Should I Take The Pay Rise Or The Quarterly Bonus?

Dear Lifehacker, Today my manager told me that, rather than paying me a bonus each quarter, she would prefer to incorporate that bonus into my base salary moving forward. I fear this puts me in a bad position for negotiating a salary increase this year. Am I better off asking to keep the bonus and then negotiating a pay increase or should I accept their offer of incorporating the bonus into my base salary? Thanks, Salary Shopper

Dear SS,

Oh, poor diddums! If only we all had dilemmas like this. Kidding aside, I do see how this could create a conundrum - on the one hand, incorporating the bonus into your base salary is a great way to ensure you receive it even when profits are down. On the other hand, it creates the illusion of a pay rise that didn't actually happen.

The first question to ask yourself is: "do I expect to be here in three months' time?" If not, incorporating the bonus into your salary is a smarter move, as it means you get to walk away with a percentage of a bonus you would have otherwise missed out on.

Even if you plan on sticking around for the foreseeable future, we'd go with the salary option. A bonus is something that can be withdrawn from the table. Or the circumstances in which it is offered may change (a lower amount, for example).

Conversely, it's much harder to involuntary downgrade an employee's salary regardless of how the business is doing. Even if you failed miserably to meet your targets, the money will still show up in your bank account (until you get fired, that is).

Also, there's no reason to assume you'll be in a better position to negotiate a pay rise by refusing the bonus. If anything, your uncooperative stance might actually hurt your chances - presumably your manager wants a more predictable budget, so she probably wont appreciate your reluctance to play ball. Toeing the company line tends to be a better career move than rallying against it.

During your next performance review, be sure to remind upper management about the bonus situation at the beginning of negotiations. You might still miss out on a pay rise, but at least they can't argue that you already got one.

On a final note, it might be worth siphoning your extra salary into a separate bank account as opposed to treating it like part of your pay cheque; that way you'll still have a chunk of 'bonus' cash available at the end of every quarter.

Cheers Lifehacker

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Comments

    Depending on where you are in life as well.
    Things like superannuation contributions, etc are typically computed as a fraction of your salary. Similarly, disability insurance payouts (workers comp).

    Really no advantage to the bonus, unless you always live week to week and it is the only way you can afford to buy bigger things. If that's the case, bonus or salary is the least of your financial problems.

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