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Employment contract for HF: delayed bonus?
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DominiConnor
Quant Headhunter
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Deferred bonus has several purposes and nothing you've said is unique to HFs.
Yes it is to tie you in.
Second it makes clawbacks easier, you haven't seen them yet ? That's why I'm here.
Third it is to make the timing and structure of your comp the same as management, that's not so much a reason as a cause. (ie it makes little sense, but that's how it happened)
Also it is to give them control over where you might go, at least that's the theory which is that they can try and use the fact that there is a pot of cash to stop you going to direct competitors, this can be more effective than non compete clauses.
I guess you've done physics to some level ?
You may recall frictionless surfaces, perfectly inelastic spheres, ideal gases, etc ? and of course many textbooks still talk of "riskless assets"...
Guaranteed bonuses are like that.
There is no such thing, at all, merely something with that name.
At one point there were various tax reasons to have bonus not salary, but they're mostly gone unless you are senior enough to have serious tax engineering at your disposal.
Most contracts have a "except if we don't want to" clause and even if they don't and you have a proper contract with recorded promises by senior management that they will pay then that merely gives you evidence to use in court as we saw recently with Commerzbank who tried to renege on "guarantees". I appreciate that Commerzbank isn't big in the US, but it's not a small bank at all.
So treat "guaranteed" bonus as "expected" bonus and discount accordingly.
Calling it "bonus" means that if they make you redundant, your payoff is a lot lower, that varies a bit with the location of your contract (which is often not where the office is) and your contract but be clear it is for their benefit not yours.
Yes it is to tie you in.
Second it makes clawbacks easier, you haven't seen them yet ? That's why I'm here.
Third it is to make the timing and structure of your comp the same as management, that's not so much a reason as a cause. (ie it makes little sense, but that's how it happened)
Also it is to give them control over where you might go, at least that's the theory which is that they can try and use the fact that there is a pot of cash to stop you going to direct competitors, this can be more effective than non compete clauses.
I guess you've done physics to some level ?
You may recall frictionless surfaces, perfectly inelastic spheres, ideal gases, etc ? and of course many textbooks still talk of "riskless assets"...
Guaranteed bonuses are like that.
There is no such thing, at all, merely something with that name.
At one point there were various tax reasons to have bonus not salary, but they're mostly gone unless you are senior enough to have serious tax engineering at your disposal.
Most contracts have a "except if we don't want to" clause and even if they don't and you have a proper contract with recorded promises by senior management that they will pay then that merely gives you evidence to use in court as we saw recently with Commerzbank who tried to renege on "guarantees". I appreciate that Commerzbank isn't big in the US, but it's not a small bank at all.
So treat "guaranteed" bonus as "expected" bonus and discount accordingly.
Calling it "bonus" means that if they make you redundant, your payoff is a lot lower, that varies a bit with the location of your contract (which is often not where the office is) and your contract but be clear it is for their benefit not yours.
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