Should You Get Your Bonus When Quitting Your Job?

by Darwin on October 4, 2010

Here’s an interesting one.  One of my friends turned in his two weeks notice early in the year right around bonus time figuring he had put in his time last year, earned a particular level of bonus, and had timed the departure and announcement right.  Boy, was he in for a surprise.  When the topic of last year’s bonus came up, he was shocked to find out the company was not going to give him a dime.  He quit, so no bonus, plain and simple.

For a bit more perspective, I knew of his work, and he’d been with the company for several years, was viewed as a high performer and had some good accomplishments the prior year.  The timing of his announcement was critical as well.  The bonuses are announced and disbursed around a period of a few weeks at the beginning of the year.  The exact date of the “discussion” pretty much depends on when the manager sets up the meeting based on calendars, vacation, etc.  In his case, his meeting was later in the period and bonuses were to be paid later that month.  What’s messed up is, if he didn’t give his two weeks notice and just quit on the last day, he would have already had the bonus disbursed to his bank account.  Because he did the right thing (he thought) and gave a full 2 weeks notice, the company used it against him and halted the delivery of last year’s bonus.  In thinking through the scenario a bit more, I can see each party’s perspective to some degree, and it’s complex.

Why He Deserves the Bonus Regardless

  • He met his objectives and would have earned a bonus had it not been for his departure.
  • It was into the next year.  He’d already earned it.  The bonus isn’t meant to be for current performance or future potential, but rather what happened in that discreet time period, which elapsed.
  • It’s a small world.  He wanted to leave on a good note and did things in the conventional manner in offering 2 weeks notice.  Now, he left with a sour taste in his mouth and will likely badmouth the company and people involved in the future.
  • Next time, will other employees that timed it that way just quit without giving any notice to avoid a similar fate?

Why the Company Shouldn’t Pay a Bonus when Quitting

  • There’s no contractual or legal obligation to do so.  The bonus is discretionary and why give money to someone who’s leaving?
  • How would this sit with other employees considering a move?  Would they also try to capture the prior year’s bonus and leave right around that time knowing they’d be paid anyway?
  • Should the company be rewarding deserters?  That’s how it is viewed sometimes, especially when going to a competitor.  Not only are you taking the know-how and training the company provided you, but then you expect a financial sendoff on the way out?
  • This money would be better disbursed to remaining loyal employees (which I doubt happened though, probably just that much less in payroll that year)
  • If this were your employee and you owned a small business, would you pay them?  We often view “the company” as an invisible system of entitlement, but we don’t think of how we’d act.  I don’t know that I’d pay it out personally.

So, much depends on perspective.  Given the amount of detail from the transaction and some of the considerations, what are your thoughts?

Does He Deserve the Bonus?

Share

You're Not Following Darwin's RSS? Check out Why You Have to Subscribe to Darwin's Finance!

If you enjoyed this post, you can get free updates through RSS Feed or via Email whenever a new post is published. Rest assured that you can unsubscribe at any time via the automated system and your information will not be sold, archived or utilized for any other "nefarious" purposes.

{ 2 trackbacks }

The Simple Dollar » The Simple Dollar Weekly Roundup: Timing Belt Edition
October 6, 2010 at 10:02 am
» Personal Finance Round-Up: How to Leave Your Job in This Economy
October 9, 2010 at 3:32 pm

{ 8 comments… read them below or add one }

1 Money Beagle October 5, 2010 at 9:24 am

A bonus is a combination of things. While it does include a reward for performance, part of the reason an employer gives a bonus is as incentive for continued loyalty and performance. Obviously an employee leaving is no longer on the radar to receive that incentive, so I completely agree that the employer had the right not to award the bonus. The employee should have waited.

[Reply]

2 ParatrooperJJ October 5, 2010 at 10:00 am

He failed the stupid test. Whom else but a moron would quit before reciving the bonus?

[Reply]

3 NY Ben October 5, 2010 at 11:51 am

I second Paratrooper’s opinion.

The last time I quit it was 3 days after I deposited my bonus, I made sure I got that money first. My next employer was willing to wait a few extra days without problems.

[Reply]

4 Darwin October 5, 2010 at 11:56 am

In hindsight, of course he should have waiting knowing what happened. I think he valued “doing the right thing” and not jamming his friends and colleagues over potentially screwing them over when he figured he’d earned the bonus and receive it. Well, lesson learned to those thinking of a move during that bonus month! Sounds like he should have known better!

[Reply]

5 jim October 5, 2010 at 7:01 pm

I don’t see how “doing the right thing” to give 2 weeks notice would require him to give notice when he did. Couldn’t he have worked a week or two more, cashed his check and THEN given notice?

Frankly it seems a little naive to expect an employer to pay out a discretionary bonus with no contractual obligation to an ex-employee.

[Reply]

Darwin Reply:

@jim, The new company wanted him to start even sooner and he held them off as long as he could. It went like this.

Early in month – annual appraisal – bonus will be x, paid at end of month.
Waited as long as he could into month, gave notice
Assumes since he was already told what the bonus was he’d get it regardless
Gives 2 weeks
Company says no dice.

I can see both sides. But what the company taught everyone else was screw the 2 weeks, take care of yourself.

[Reply]

Money Beagle Reply:

@Darwin, That last sentence hits the nail on the head. After all, when an employer lets an employee go, do they give them two weeks notice on that? No, it’s ‘OK, it’s been a good run, there’s the door.’ Yet, the employees have to go the two week route as not to burn any bridges.

[Reply]

6 jim October 6, 2010 at 2:39 pm

If he was told explicitly by his former employer that he would get a bonus of $X amount on Y date then he might have a case to sue for the money. I’m not a lawyer so I don’t know, but it seems to me that if they promise you money then they’ve now obligated themselves to pay it. Is there any paperwork? A paper trail would probably help too, but even a verbal statement could be enough for them to legally owe him the money. Something he might consider.

[Reply]

7 Saagar October 6, 2010 at 6:53 pm

Bonus is at least fine. I was an IT consultant from a company and had a total vacation of 25 working days left and I was 100% billable the whole time. I gave my notice and they refused to pay me for the left over vacation. That itself was about more than 1 month pay. Totally ridiculous. And apparently the law is on their side!!! I could have gone on vacation and then left the company but I didn’t want to do cheap tricks. Now I regret not doing that !!!

[Reply]

8 Nicole October 9, 2010 at 9:40 am

From the company’s perspective, the bonus is a way of encouraging future work in a repeated game situation. Employee wasn’t going to play in the next round, so there was no reason for the employer to give a bonus.

[Reply]

Leave a Comment

You can use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>