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Comment by maest | Hacker News Reader

> the best case - maximum bonus - just equates to a "meh"

Can you elaborate on this? I find it surprising since bonus pays are very commonly used in many industries (and, in fact, relied on very heavily in e.g. finance)

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Performance bonuses the way they are commonly done doesn't work in finance and sales either -- they're just so in-grained in the culture that it's impossible to hire a finance or sales person without offering bonuses the common way.

The problem is that individual performance is a much smaller factor of outcome than commonly believed. Organisational structure, luck, social standing in the organisation, etc play a much bigger role. So in the end, performance bonuses usually reward random variation more than individual prowess (as much as the recipients would like to think otherwise.)

This one-armed bandit type compensation, when disguised as a performance bonus, creates confusion, weird incentives, limits creativity and experimentation, and breeds bad blood.

I remember going through performnace-related bonuses. If somebody tried super-hard and got a "level 5", they got a £5K bonus. Somebody ticking along without being outstanding got £3K. Most people realised the extra £2K wasn't worth the extra effort required to get it.

A raise of even a small amount makes a big difference over time because raises continue and even compound a little. Consequently, a cheap company will try to make the near certain portion of a bonus feel like part of your negotiated salary and extract effort with bonuses as ephemeral raises.

It doesn’t compound at all. If the going rate is $200k and I switch jobs my previous salary doesn’t matter, and therefore compounding doesn’t matter.

in what industry does your previous salary not matter? (Not a snarky ask btw.) I have never entertained an offer blow my current salary, so personally find them highly correlated (sw eng).

Nobody is talking about previous salary, the $3k/$5k thing was about yearly performance bonuses.

My argument is general enough to cover that case too. Performance bonuses don't compound long term for the same reason.

Previous salary can’t affect future salary unless you let the previous salary be known.

There is a bit of a bias to this.

Higher salaries will get disclosed more, because if I get an offer below my current salary, then I can disclose and at the very least get a match or refuse the offer. At a lower salary, there is a higher probability that the offer is higher, and my current salary does not matter.

I believe that people more rarely accept a downgrade in salary, so the probably of acceptance is also conditioned on the current salary. What this means is that the effect is biased and probably non-linear, but I wouldn't qualify it as non effect.

Raises that are a percentage will compound over multiple iterations, that's what he meant.

Only given the following conditions:

* You stay at the same company

* They are happy to pay above market rates and keep giving you raises even if you are paid over market rates.

This would be the exception, and probably for some real specialist stuff.

If I get a 10% raise today, it will have no impact on my 2030 salary. Getting more stock might be a different thing if you are very lucky and the ducks line up.

We're not talking about raises, we're talking about one-time performance bonuses.

We are talking about performance bonuses, a trick to avoid permanent raises.

The bonuses where I am now are a % of the employee's base salary. A mid-level "meets" engineer can expect something like $20-25k during an average year for the company. Up to twice that for a strong year.

It's different in finance because a finance guy can go to his boss with hard proof and say "I made your company 10 million last year" and ask for 500k bonus.

But developers do not have hard proof and they will be getting 10k bonus instead.