Trading Bonus - how should I bring up my 2021 bonus discussion?
So, first time posting on WSO.
I head up the oil trading division at a trucking company (the trading division isn't very big, i'm the only trader and have some support staff). For 2020, I blew the PnL out of the water and generated $6-8mil and got 1% of the that, with the argument that more of the senior (sales) staff got lower (their PnLs were also lower).
For 2021 year-end bonus, I am thinking of reaching out to my boss to start a conversation on switching my bonus plan to be a percentage of my PnL (currently it's a set range). I'm quite valuable to the company and can easily get hired away, but I like the company and think I can likely generate $XX mil for them soon. But, for me to muster up the motivation to do that, I have to make sure I'm getting properly rewarded with at least a 5% share of that (if not slightly more). At my previous company, large trading house, if I generated $3M pnl I would get 150-200K.
I was thinking of proposing some sort of a sliding scale for the bonus...for the first $1M I generate I want 60K-80K bonus, and then beyond that 4 - 5% flat.
Do any of you have any advice on how to go about this properly without offending?
Right now, as it stands, if the company's PnL do well in 2021, I will get ~70K whether I generate 1M or 100M which is neither good for me nor them (because this lack of incentive will ensure that I will lose motivation beyond 1M).
Thoughts?
I think 5-10% of PnL as bonus is good...otherwise, just leave. The big commodity houses like Glencore, Traf etc will pay you 300K bonus if you're a senior trader in a small team that generated $10M. Usually the bonus pools at these firms starts after costs have been met and then it is funded at 13-17%... the big dogs take the 17% type of numbers while the smaller guys get 5-10%. Don't settle for less.
Yeah 5% would be a good number to shoot for. I think part of the issue is trading not being the company's core business, it may be hard to justify paying that if the overall business is in the red. Maybe your tiered P&L structure within an overall group income requirement (if if the group as a whole made money, I get the whole 5%).
i would argue that, if you want a % bonus of P&L then...there is no floor to your bonus...you eat what you kill.
If you don't make $$ trading, then you don't get paid above a meager base...but if you hit it out of the park, you get rewarded appropriately.
If you were a PM at a multimanager hedge fund, thats how it works...you have a small base salary to pay your rent and basic cost of living, and then bonus is flat % of P&L. At a hedge fund, you would get 15% of your P&L...but you would also be subject to tighter risk constraints...so i think asking for a flat 5% in your situation makes the most sense. Assuming your base salary is 60k....just ask for that plus 5% of your P&L as your bonus, whatever that may be....no sliding scale...just a flat 5%...and then your economic incentives are aligned with the company.
Could the company replace you? Yes they can. Would your replacement make as much $$ as you, or even better, for this low comp?
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