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Great advice from The Lawyer Whisperer

June 16, 2017
Question

Is it common for startups not to offer bonuses?

answer
Julie Q. Brush

The Question: I have an offer with a startup company. The base salary and stock are ok but there is no bonus, which makes the offer way less attractive. Is this common? Should I turn it down?

When it comes to preserving cash, startup companies today aren’t much different than they were 15+ years ago. While compensation has risen over the years (about 10%-15%), staying flush is just as important as it has ever been.

For the early stage startup, it is quite common for a compensation package…at all levels…to be void of an official target bonus. Some may offer a spot bonus at the end of the year for a job well done, but those kudos are purely discretionary and nowhere to be found in writing. As a company matures, the bonus offering can and usually does change. Some mid-stage startups have special and unique packages and incentives for their C-Level and “top” execs, but those perched lower on the totem are not as fortunate. In these instances, if you are a Chief Legal Officer, General Counsel or Head of Legal type, you may qualify for a target bonus, which typically falls between 30%-50%. Once a startup has reached “late-stage” status, some kind of bonus eligibility for all employees has permeated the organization.

If you have received an offer that does not include a target bonus from a start up company, you should understand that this is quite common – and is not a reflection of how the company values your candidacy. But there are five key factors that you’ll need to consider before determining whether to accept or decline your proposal.

1. The Company Will Likely, Maybe, Possibly Offer A Bonus…Eventually.

As a startup company grows and as it takes on more investment, the need for more talent increases – and the ability to compete for the best talent is a must. One material factor that influences this ability to compete is the compensation package. Money. Stock. Bonus. It starts with the critical addition of engineers where competition is stiff across the land. So management is pulled into the fray of revisiting executive comp or risk losing out on the candidates needed to take the company to the next level. This is typically when things start to change within the organization. And when executives and senior level personnel in other verticals get wind of the new compensation offerings, they demand equitable treatment. So……………If this employer is a growing and scaling company, the implementation of a target bonus will happen – and probably sooner than you may think. On the flip side, if the company doesn’t do well or treads water, the status quo will be the norm for a good long while and the lack of a bonus will remain. So assess the company’s momentum. If it’s promising, rest assured, a bonus would be in your future and you need not overly fret about it now.

2. Can You Make Ends Meet On The Salary Offered?

Assuming your offer stands as-is and the pot is not sweetened, you must determine whether you can financially afford to take the job. Can you pay your bills? What about savings? Any left for a little fun? If you go through this analysis and determine you can make it work, you relieve yourself of a whole lotta pressure that would compromise your experience at the company. Ironically, it will also give you confidence, conviction and calmness to get what you need if you present a counteroffer. If you determine you cannot make ends meet, you’ll need to ask yourself…

3. Would A Counteroffer Make A Difference? If So, What Are The Numbers?

If you have determined that you can’t swing the offer as-is and it’s just too tight, then ask yourself whether there is a number – a specific number – that would make the difference. If so, make the counter and ask for what you need, but be prepared to walk if you don’t get it.

4. How Compelling Is The Role?

You’ll be performing this job day in and day out for many days, weeks and years to come. So it should be compelling in order for you to remain challenged and interested. Does it offer challenging work? Opportunity to broaden your skill set? Manage people? More territory? Lots of responsibility? Opportunity to operate business strategy? Is it in a space that is inspiring? Etc. Assess how interesting this role is to you and how it aligns with your professional goals and desires. There’s a lot of weight to a role that is compelling.

5. Does The Opportunity Move The Needle For Your Career?

How well would this job position you for your next job? Gone are the days of the gold watch and lifelong pension. So the odds are extremely high that this job wouldn’t be your last. In fact, you’ll likely have several more jobs before you ride off into the sunset. So how this opportunity positions you for your next is important. Does this opportunity move the needle for your career aspirations? If you’re giving up a bonus, the role and overall opportunity should move your career forward in some material way.

It isn’t uncommon for a startup not to offer a bonus as part of an offer of employment. And while this can drive down the overall cash potential in the near term, other factors may be in play to mitigate that monetary sacrifice. After assessing the factors above, what do You conclude? Does the awesomeness of the opportunity outweigh the financial sacrifice? Or is the ROI (return on investment) just not there? Your best…and right path will hinge on the answer to these questions. So do just that and gain the clarity you need to allocate the weight, break out your scale and see which way it tips.

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