Guaranteed minimum bonus

what exactly is your question? of course there are guarantees. it's one of the main reasons people switch companies.

I suppose my question is as a rule of thumb, what would be an appropriate range in which a 2nd or 3rd year associate be asking for in terms of guaranteed bonus. 10 - 20% higher than at his/her previous firm?

You can't get a guarantee. Someone previously posted in this forum about his friend receiving a first-year offer that specified a minimum bonus - but this is ridiculous.

Employment is at will (meaning you can be terminated at any time for any reason or for no reason at all) and you are not taking a CEO spot - so feel free to negotiate a target (which is as good of a guarantee as you will get), but don't expect a "guaranteed" figure outside of your base salary.

I work in PE, but as a general rule at the fund your "target" is the lowest comp one should reasonably expect. For our first year class last year, bonuses ranged from 1.0x to 1.5x the bonus target (although non-cash comp was identical for the entire class).

Thanks for your feedback. So basically, there really isn't a whole lot of guarantee that one would have if he/she was to crosses the street to a competitor. Sure there may be some signing bonus, but from a year-end performance bonus perspective, there really isn't a whole lot of downside protection when compared to his/her prior year's payout. Having said that, either the move should be b/c of a promotion, or the person really has to like the firm or believes it offers better opportunities, as there is no assurance that the person would be compensated better than before if it's a just lateral movement. Does that make any sense?

I think this is generally correct.

That being said, as part of negotiating a potential transfer you could certainly try for higher than your expected comp next year at your current firm (and this happens all the time). Its just that your negotiated bonus, both at your current and your potential future job, will not come with 100% guarantees.

the question is not about being a first yr associate with guarantee. it is about making a lateral move after a few years. I would say the vast majority of people that I know who've moved have gotten a guarantee. Hard, in writing, I will sue if you don't pay me sort of guarantee. Unless the opportunity elsewhere seems SO great, why wouldn't you ask for one?

"I suppose my question is as a rule of thumb, what would be an appropriate range in which a 2nd or 3rd year associate be asking for in terms of guaranteed bonus. 10 - 20% higher than at his/her previous firm?

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as to this, ask for whatever you can get. I would need more than a 20% increase as a gty, but then I generally like my gig.

Jimbo - do you have a guarantee with your current emploeyer? Below C-level spots, I've almost never heard of people getting a guarantee on their bonus. Seems like you'd actually need some sort of employment contract that specifies you get the bonus regardless of whether you're fired, otherwise you have no guarantee.

And if you're going to guarantee an amount, why not just throw it into base salary?

Thanks for the feedback above.

Jimbo - I get the formatting issue as well but I just hit refresh or F5 and it's ok after.

To be specific, I'm enquiring about guaranteed bonus in IB, but I do appreciate your insight in the world of S&T.

As for my specific situation, I am relocating from Canada to Hong Kong and to Asia and I'm currently working for a large bank in Canada. Unfortunately, my firm doesn't have an office in Asia and hence I couldn't do an internal transfer. Needless to say, my negotiating/bargaining position is not as great as someone moving over from a bulge bracket. Having said that, given I'm an unproven worker in Asia, it would be quite difficult for me to secure a minimum guaranteed bonus to at least match what I'm receiving here at my current firm. The saving grace is that I'm way ahead of the game simply from tax savings (40+% tax bracket vs. 15%).

I was just curious as I have heard from a reliable source that some people have successfully negotiated guaranteed minimum bonuses within the investment banking world as part of their employment contract.

Jimbo is spot on here, with respect to the S&T side. I can't speak to the banking side. People move to get paid (generally speaking), and why are you going to take that risk if you won't get paid?

Guarantees are very common in this business.

I guess that's why it's very difficult to have firms give up their "sole discretion" clause re: bonus. Asking for minimum guaranteed bonus is just that, to safeguard against market downturns effectivelyl setting a floor with an "unlimited" upside based on performance. I'm curious how hard they would laugh when I throw the idea on the table... :S

"Wouldn't there be a lot of tension in a down year if lateral hires were making signficantly higher comp that had been guaranteed to them during a better general economy?"

Yeah, but what are you gonna do? You're gonna move to another shop, which will give you a guarantee? Otherwise you'll just suck it up.

Jimbo - I understand if you don't want to divulge your own details, but do most folks in S&T sign up for a guaranteed bonus when they are fresh from undergraduate, or is this something that someone would ask for (regardless of whether they were switching jobs) 2-3 years out?

I just took a glance at a couple of the offers I had received before joining the PE fund where I currently work (this was after 2 years work exp.), and it is very clear in all of the documents that my anticipated bonus would be contingent on strong performance of myself and of the fund. Even though no one expects to receive an amount lower than the anticipated target figure, it sounds like traders have a much better deal in terms of being able to lock something in.

It's tough ask for a guaranteed bonus especially in my position where I haven't proven myself in a new market yet. If I put myself in the shoes of the employer, it would be extremely difficult for me to justify granting guaranteed bonuss. Unless the candidate is highly sought after by a number of competing firms or that I have direct working experiences with him/her.

"but do most folks in S&T sign up for a guaranteed bonus when they are fresh from undergraduate, or is this something that someone would ask for (regardless of whether they were switching jobs) 2-3 years out?"

I think you and IBinAsia haven't been reading my posts. I'm talking about lateral movers. Ppl aren't just handing out guarantees. They're used an incentive to switch shops. Consider your signing bonus like a gty of sorts, I guess.

I would need a guarantee away to move.

"Asking for minimum guaranteed bonus is just that, to safeguard against market downturns effectivelyl setting a floor with an "unlimited" upside based on performance. I'm curious how hard they would laugh when I throw the idea on the table... :S "

uhh, no it's like a forward actually. you generally dont have upside. that's just the amount you will get paid.

I can't speak for the S&T side, but for IB, you are definitely missing one large aspect. Bonuses are considered a variable cost when it comes to modelling extreme situations for the risk management teams. They rely on this fudge factor to get them over the line with respect to regulations etc.

If you guarantee a bonus, it is considered equivalent to base, this is why it doesn't happen in IB. I've heard thousands of people boast of it, yet never seen one contract in which it is stipulated. I have even been on the other side, where an applicant asked and our risk management shot him down (laughed it out of the room).

I'm sure there will be a thousand people who give the opposite view and that's fine. I think it is an urban banking legend.

Note: In Australia, as soon as you guarantee a level, it is no longer a bonus and can not be stipulated as one.

"If you guarantee a bonus, it is considered equivalent to base, this is why it doesn't happen in IB. I've heard thousands of people boast of it, yet never seen one contract in which it is stipulated. I have even been on the other side, where an applicant asked and our risk management shot him down (laughed it out of the room)."

What about Lorello and Quattrone in the early 2000's?

I still don't buy the idea that people with 2-3 years of experience would get a guaranteed bonus in a written contract.

Similar to beaker's experience, I have never ever seen this stipulated.