Clawbacks
Hi all,
My firm has stated they will clawback any gross payments (bonus, sign-on etc) in the 12-months prior to a resignation if I were to resign within a set number of years after my start date. Does anyone have any knowledge of how strictly firms enforce clawbacks? If I were to resign, how are they expecting people to pay back gross sums when we get less than half of it?
This post isn't restrictive to PE so happy for all others to chime in with their experience.
Thanks!
I haven't come across this type of clawback.
If you wanted to push back then most PE fund managers allow a clawback in the LPA but the clawback is always post tax. Escrow concepts help give LPs some comfort that the GP carry clawback can actually be applied.
So not sure how the company you are speaking to expect to a) clawback and b) clawback a gross sum.
He is referring to compensation clawbacks of his salary and bonus, not LP clawbacks from GPs taking carry or fees.
The OPs clawback contract is very aggressive. I've never seen it extend to a year, it's usually 3-6 months and doesn't roll like that. I'd try and move elsewhere tbh.
Agreed seems extremely aggressive. At the very least you should try to push back and have the claw back net of tax as else you're on the hook to work for free for a year if you ever decide to leave (e.g. if your bonus is 100% of base and you have to pay it back using post-tax earnings).
Thanks, I understand. Given it is MF, I don’t think OP would be able to use their argument to LPs against MF.
Hi All,
Thanks for the feedback. This contact is from one of the MF PE firms analyst programs so I feel I have little/no leverage here. For anonymitys sake I won't disclose which fund it is but its something I am worried about.
The period over which this is enforceable is >2 years, meaning that if I resign at 23 months I'd be liable to pay back any bonuses from my 11th month there to the 23rd month. Just given how situations can change I see this as quite dangerous as I'd receive less than half the actual gross bonus and paying back the gross amount would be practically impossible.
You're basically having to not touch the money until you're at least 2 years in. Pretty messed up, tbh. Are there any associates that went through that program and had the same treatment who you can speak with?
Yes, the majority of the current team started as Analysts and worked their way up. It's just a matter of finding someone I feel comfortable sharing this concern with. I don't want them to get the wrong impression.
My hope was to start investing any bonus money I get ASAP but I think your suggestion is smart.
In the same boat (Grad programme at a MF, 12-month clawback for 3 years). Speaking with some of the analysts at the firm, most of the places they were interviewing with were willing to pay for it so they could jump ship before the 3 years.
We might actually be at the same place. That's good to hear regarding future employers. I don't have an inclination to leave anytime soon but wanted to know how that would play out.
I moved firms to a HF this year from a much worse PE fund at AO level and almost every HF I interviewed with was willing to compensate for pro rata expected unpaid bonus this year (~120k of 200k total bonus.)
For required payments you would need to make on your end, and also being a more attractive candidate, I’d think it’s very likely you get paid out.
If you get exited , this is one of those things that HR will negotiate around regarding releases.
Also someone from Blackstone to confirm but I believe some firms do a flat 22% federal withholding on bonus.
So…if you want to resign you just need to get fired. I have several ideas!
Unfortunately, termination of employment for cause (aka firing) also results in clawbacks.
Also don't particular want a negative review from them on my resume
You should contact an employment lawyer. They should be able to address / handle both concerns. Can’t imagine this is actually legally binding.
I am certain that I know which megafund and analyst program contract you are talking about.
Did they end up enforcing the clawback?
Is this NY?
Yep pretty sure this is Blackstone analyst program. Have a friend at a bank doing M&A who did a summer there and turned down the return offer because of this issue.
How long do you have to stay for this to apply? 1yr from starting is standard but anything longer than that would be wack.
Can you say that you do not want to receive any bonus?
Does anyone actually enforce these? I've seen similar, albeit less aggressive verbiage before but was under the impression that nobody is enforcing them.
I want to say people have commented centerview has in the past for their analysts, but others can confirm that. My very first job, at a law firm, didn’t enforce and actually explicitly waived.
To legally claw it back it seems incredibly painful for the firm + a huge reputation risk?
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