The other thread turned into a train wreck, but I think there's a serious point to be discussed, so please stay (at least somewhat) on point here.
Below is Bassos' answer to hello_actuary's question - I'm not sure if it was a serious post, as the thread devolved into silliness. I'll assume it is serious, just wanted to point out that it may not be.
Basically, says the bonus's primary (sole) purpose is to attract the right people. I disagree - it's a significant purpose for sure, but far from the sole purpose.
Many companies don't really think about bonus as attracting, it's more about incenting. So, if you let people know that you are going to pay for selling, or for client retention, or whatever, and that their bonus will go toward that, then you have them thinking all year long about that, because they know that's the easiest way that they can get "extra money" - it's similar in some ways to the exam-passing bonus or raise.
So, I think it's pretty easy to look at many businesses and see that the first couple years, a person is more of a "cog" - if you leave today, I can replace you tomorrow with somebody that just needs a short time to get up to speed. You don't do a lot of independent thought and need lots of instruction.
After a couple of years, the person has institutional knowledge, client relationships, and other reasons why they're no longer a cog, and can't be replaced so easily, plus the best people (who you want to pay more to) are working more independently (handing you a finished report instead of a bunch of random spreadsheets that you have to sort through), so it's time to pay them for that or risk them leaving.
Bonus also allows a company to balance good years and bad years, which can matter to some companies more than others - and a young person may not be able (or willing) to absorb the uncertainty, so paying a bit more with no bonus for them may be a more competitive offer, versus senior people want the upside and can absorb the hit on a bad year, so better to pay them in variable comp; I think this is probably a very small part of the original question.
There's also a timing component, in that you may want a bonus as a "holdback" - if you do a ton of work at yearend, then paying bonuses in March can keep people around for that. And maybe you care about that less for EL people.
There's also the possibility of firms that have determined that they choose to (or need to for legal reasons) pay overtime for the first two years, so they consider that compensation for extra effort, which is what they otherwise compensate for in the bonus.
Not disagreeing with Basso's comments, other than his comment that it's the only answer.
Below is Bassos' answer to hello_actuary's question - I'm not sure if it was a serious post, as the thread devolved into silliness. I'll assume it is serious, just wanted to point out that it may not be.
Quote:
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Originally Posted by Basso (Post 8389369)
Originally Posted by hello_actuary View Post
Why is there no bonus for analysts (<=2 years experience)? This company thinks it can recruit qualified people to work there without providing a bonus to those with less than two years of experience. There is no other answer to this question. If you don't like it, find a different company. As an aside, I suspect this company is correct. |
Many companies don't really think about bonus as attracting, it's more about incenting. So, if you let people know that you are going to pay for selling, or for client retention, or whatever, and that their bonus will go toward that, then you have them thinking all year long about that, because they know that's the easiest way that they can get "extra money" - it's similar in some ways to the exam-passing bonus or raise.
So, I think it's pretty easy to look at many businesses and see that the first couple years, a person is more of a "cog" - if you leave today, I can replace you tomorrow with somebody that just needs a short time to get up to speed. You don't do a lot of independent thought and need lots of instruction.
After a couple of years, the person has institutional knowledge, client relationships, and other reasons why they're no longer a cog, and can't be replaced so easily, plus the best people (who you want to pay more to) are working more independently (handing you a finished report instead of a bunch of random spreadsheets that you have to sort through), so it's time to pay them for that or risk them leaving.
Bonus also allows a company to balance good years and bad years, which can matter to some companies more than others - and a young person may not be able (or willing) to absorb the uncertainty, so paying a bit more with no bonus for them may be a more competitive offer, versus senior people want the upside and can absorb the hit on a bad year, so better to pay them in variable comp; I think this is probably a very small part of the original question.
There's also a timing component, in that you may want a bonus as a "holdback" - if you do a ton of work at yearend, then paying bonuses in March can keep people around for that. And maybe you care about that less for EL people.
There's also the possibility of firms that have determined that they choose to (or need to for legal reasons) pay overtime for the first two years, so they consider that compensation for extra effort, which is what they otherwise compensate for in the bonus.
Not disagreeing with Basso's comments, other than his comment that it's the only answer.
No bonus for first two years...