Year End Compensation Planning
Thought it would be helpful to get a thread going regarding year-end compensation as it pertains to salary increases, bonus expectations, etc.
With a weak capital markets backdrop, record inflation, and industry compensation that seems to continue to be on an up trend, especially at the junior-level, it will be interesting to see how employers approach comp planning as we approach year end. Even though the hiring market has cooled, my shop is still struggling to find capable junior talent with relevant transaction experience.
With that being said, what are people's expectations heading into year-end reviews? Do people expect above trend salary increases in light of inflation?
I’m in capital markets at a national brokerage. Not expecting much
Word on the street for 2023 budget is 3-7%.
Pink slips…
Expecting to maintain comp from prior year which will effectively be a pay cut…
I did a good job and made the company money, so I’m looking for an increase in pay
I'm wondering about this as well. Our firm had a monster first quarter before the debt markets went wild. The concept of getting a bonus seems to me to be tied to productivity and profits through the year, and not forward looking for what 2023 will look like. On the other hand, it makes perfect sense to conserve cash and take a conservative approach going forward. I guess I would think that if a bonus is going to be reduced this year, despite having a pretty good year overall, I'd expect that there would be a similar bonus situation next year even if it turns out to be a complete dud, transaction-wise. Feels like ownership can't really have it both ways
I generally expect that management will use any excuse they have to reduce compensation for people. At my old firm, my bonus was cut in half during 2020 "due to COVID", but two weeks later at our annual company meeting our CEO bragged about how 2020 was our most profitable year ever. Not going to lie, that left a really bad taste in my mouth, but was a good learning experience.
Now, good management is probably viewing it less as a reason not to pay people and more of a, hey we are heading into some chop here let's make sure we can take care of people for the next 18 months.
Yeah well, shitty companies and shitty managers are going to be penny wise and pound foolish. It seems to me that 2020 was an opportunity to build loyalty; I certainly felt that way about my firm, where compensation stayed close to previous years and a lot of concessions were made to the pandemic. Now your firm runs the risk of losing you the moment you get a better offer - thousands of hours and hundreds of thousands of dollars potentially down the drain because they didn't want to spend the extra couple million on comp.
And fully agreed on the second. If the principals are saying "hey, we're cutting bonuses in half because the macro outlook for 2023 is grim and we want to be able to make payroll" that is a very different story. I guess my point in general is I want to see management feeling pain in their wallets before the employees do - after all, they make outsized returns in good years.
Credit fund. Expecting flat / slightly up all in. Lower volume albeit w ripping rates so PL is up… many debt funds should be doing well.. but pending their corporate / funding capitalization … some (many) are doing very poorly as well… and those relying on capital market execution …
Received a promo last year so hoping bonus is up YoY from when I was a peg lower on the corporate ladder. Unfortunately that means I don't have solid numbers to compare against but we'll see how it plays out vs. anecdotal comp others at my same seniority received last year...
At a large developer, and our office has a solid number of active projects and we've gotten assurances from leadership that we're in a good position since all our our 2023 business plan is capitalized, and most of 2024 as well. I imagine they'll have some bonus and small COL (~3%) to keep everyone tide over, it won't be great but I'm pretty sure they're not going to let it be flat. I'll have more news (as I'm sure a lot of other people will, too) in a month.
At a large developer as well. When are bonuses paid out at your company? Do you guys do once a year or twice?
I'm still relatively new, but I understand we do it annually.
Special situations fund, VP/Principal. Expect up YoY given strong deployment. Firm will subsidise it (me and other good deployers) or risk losing us in this environment for SS debt funds. Won’t be the same for associates: I know already there will be significant difference based on perceived relative importance (ie we can afford to lose a couple).
Do you work in real estate? It sounds like no
People shitted on this but I cannot get why. It’s how it works: most juniors are fungible and that leaves them very little negotiating power.
I do think comp will be up for people who deployed capital this year, across credit funds. If comp is down in your fund and you have deployed / not realised a loss, then you need to realise management thinks they are ok to lose you / don’t value you that much.
While we typically do more deal sourcing at VP and above level, we need our analysts and associates to be content and productive to make sure we can actually do our deals. While I feel like I paid my dues and worked my way up, I haven't forgotten how much grinding it took at the junior levels and they are certainly important otherwise my own workload would be impossible. If we lose associates because we aren't paying them market rate, then we lose productivity in the short term from finding a replacement and then even more time training them and at the end of the day we will have to pay market rate or the exact same and just lose time.
Associates give us more time to do our own work and I'd say my time is rather valuable at this point so we make sure they are happy enough to stay. Especially since a 3-5% increase in their salary is much less than a 3-5% increase in our salaries at a VP and above level.
Totally agree. I said: “We can afford to lose a couple”, not “We can afford to make them all unhappy”.
As I said, there will be significant pay dispersion in our associate class this year: those who get paid less should understand they are replaceable.
However, if they don’t pay the few VP/DIR well and lose them, the impact on the team will be significantly higher.
This is just reality. I’ve found only a handful of associates in my career so far which I could truly label “indispensable” and these made their way up. Most are fungible which doesn’t mean they didn’t become indispensable when they moved to another shop.
I said this in another thread as well, but my debt fund is probably flat bonuses with 3-5% COLA raises.
We don’t do reviews but last year was about a 13% bump, this year not sure. We bought a lot but obviously the economy is different.
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