So you also dislike bonuses for white collar professionals?
Because it's exactly the same thing.
A bonus is paid to you by your company (evaluated by your boss) and is more like profit sharing.
A tip is paid directly by the customer. The customer has no way of knowing if you are being paid a living wage or not. They have different incentives if they are a regular or not. The waiter at a busy restaurant will see hundreds of customers a day, but the customer may only interact with this waiter once. The waiter understands the house systems and knows how to maximize tipping. These are all ways that the waiter has an information advantage and can wield it against the customer. Maximizing tipping and providing good service to everyone are seldom the same thing.
People like to think that tipping puts the customer in power but it really just sets up the customer to be gamed. This aspect doesn't exist when we're talking about bonuses with your employer.
I do dislike them, because in a way they are the similar - you work really hard and you can't be sure if you will get it or not.
It's the classic carrot on a stick motivation.
> Because it's exactly the same thing.
At most companies, how you get a bonus and how much it is is very clearly defined, and so in that regard, it's not similar to tipping at all.
I'm surprised that this has been your experience. In many cases, even cases where bonus is 3x annual salary, the bonus is "discretionary" and little is clearly defined.
It's a completely different situation than bonuses on top of a salary that already covers living expenses.
Bonus makes up a significant portion of my regular income. I'm sure that's true for many other HN readers.
> It's a completely different situation than bonuses on top of a salary that already covers living expense.
In many cases, salary does not cover living expenses. In some instances bonuses can be 10x annual salary or more. Even if bonus is only 3x annual salary, you wouldn't say that salary covers living expenses as few people live on only 25% of their income.
Also, if you're still working there and looking for fresh CS grad (Scala and Linux admin experience), my email is in my profile ;)
New York State's budget situation is good or bad based on how good or bad bonuses are -- we're talking billions of dollars.
Even in the very unlikely event that you have an airtight contract, there are instances where the employer simply will not pay you. Legal action might be the only recourse in this situation. Sometimes you are required to go through arbitration and sometimes you have to sue.
Can you teach me how this tax avoidance works? It seems that I am missing out. Can you also specify the jurisdiction where this works?
> mostly part of their contract
I can think of many people whose bonuses are 3x or more their salary and who do not have a guaranteed minimum bonus or even a strict formula based bonus.
1. The Percentage Method
The IRS specifies a flat “supplemental rate” of 25%, meaning that any supplemental wages (including bonuses) should be taxed in that amount.
This works for bonuses up to 1 million.
> I can think of many people
Yes, there are plenty of idiots even in finance.
(It's mostly a disadvantage. I get about 60-70% of my income in bonus and stock which is treated the same; it just means that, if I don't plan ahead for it, I end up with a surprise tax bill on April 15th. I do plan ahead, but the whole process is obnoxious.)
Or if your bonus is in January you can have a higher witholdings from salary and the default 25% from the bonus. Just balance it by the end of the year.
But that's just simple stuff, there are also other benefits to the company.
But it's absolutely not correct that paying people with bonuses lowers their effective tax rate.
I'm all for the no tipping and i happily work without a bonus. And i would expect other to as well. If you can't show up and be consistent in performance without a carrot then thats maybe not a great reflection of how you work and what you value.
I am not aware of a study on this, but I would bet my annual income that those factors affect your bonus.
It's not just banking. I was horrified at some of the behavior I saw from the sales folks at a software start-up I worked for (including the CEO). As a sales lifer, our CEO came up with some pretty generous comp packages for the sales team that promoted bad behavior and short-term "wins" that the rest of us would be cleaning up for months.
I think this should be obligatory link in all bonus related discussions:
It's possible that they're unavoidable given the volatile nature of business revenues and perhaps a system with no bonuses would result in lower total compensation.
A server gets their tips probably about once an hour or so and the amount from one customer may differ with essentially the same service for another customer. Esentially random and arbitrary.
Do white collar professionals always expect to get a 20% bonus, no matter how well the company does?