Associate Bonus Clawback

r9logic's picture
Rank: Senior Chimp | 22

So I just got hit with a new concept in my annual review. The firm I work at has had significant associate churn in the past year, and I guess they decided to implement bonus clawbacks. The rough mechanics are: When i signed my offer letter last year, they gave me a bonus range of $x to $y. Then in the review, they said, here's your "base bonus" ($x) and "premium bonus" ($y - $x). Accompanying this discussion was a letter acknowledging that if I left in the next 12 months, I had to pay back an amount up to the premium bonus if the fund requested it.

This seems significantly off-market for PE associate comp, no? I understand it at more senior levels (talent retention), etc. but 1) I've never heard of it for associates and 2) almost creates perverse incentives to leave the firm sooner (when bonuses are smaller in early years of career) to minimize the financial cost of leaving.

Any thoughts / advice / is this normal?

Comments (8)

Mar 1, 2019

Everything happens for a reason. Why are they having problems retaining talent? Is it because of fund performance? Culture?
I have not worked at many funds and I have never heard of claw back on cash bonus at the associate level. Is this 2 and out type of firm or partner track? Either way seems to be a shitty way to retain talent via golden handcuffs, if you can even call it that.

Mar 1, 2019

That is definitely not market for cash comp. I sincerely hope this is not indicative of a broader trend.

Mar 1, 2019

Sounds to me like pretty soon they're going to solve their talent retention issues by attracting worse talent.

Mar 1, 2019

never heard of this...pretty brutal.

Mar 1, 2019

There's something pretty toxic about a firm trying to solve a broader issue by targeting the comp of those lowest on the rung. This is definitely my first time hearing about this in PE.

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Mar 2, 2019

definitely off market. You should start looking for another job. This is not the type of behavior that a good PE firm exhibit. Tells you a lot about the founders mentality towards employees.

Mar 2, 2019

Yeah. If they are doing clawbacks at the associate level, there is something fucked up going on there. This is red flags out the wazoo.

The fact that they said they can claw back up to the value of the "premier" bonus should stand out and provide ample cause for concern. Say the range is 50K base to 100K premier, if you left, they may hold you to a clawback of 100K. Based on the way you wrote your post, that is disconcerting. Plus, there is no indication of pro-rata clawbacks and there is a huge tax implication with this.

Mar 2, 2019