Can We Split Bonus Payments?

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Question: We pay bonuses to techs for leads and accessory sales. Our current policy is to pay half of the bonus up front and the other half at the end of the year, provided they are still employed with us; however, if they quit prior to year-end, they forfeit the year-end portion. We are considering altering the policy to reduce the amount of our bonuses (in half) and still pay up front, but change the wording to state that we will match at the end of the year any bonuses earned for the year, if they are still employed with us then. Any issues with the way we are currently doing it, i.e., paying half at year end or the way we are anticipating changing it, i.e., matching at year end?

Answer: In effect, there are two bonuses — one paid for leads and sales, the other for remaining employed through the end of the year. Describing the bonus system in the way you are proposing makes this distinction clear and also avoids potential problems surrounding the notion of “forfeiting” a portion of compensation. The employee is bonused for leads and sales during the year.

At the end of the year, he is bonused again as an incentive for remaining employed, in an amount equal to the leads and sales bonuses earned. The employee does not forfeit anything; instead, he has the opportunity to earn two separate bonuses.

So, to answer the question directly, the way the contractor is anticipating changing the bonus is the better way to go.

DISCLAIMER
This response is intended for general informational purposes only and should not be construed as legal advice or a legal opinion, nor is this column a substitute for formal legal assistance. For help with particular legal needs, members are invited to consult with Brooke Duncan III of Adams and Reese LLP. Mr. Duncan can be reached at 504-585-0220 or by email at brooke.duncan@arlaw.com.

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Posted In: Legal, Management, Money