Need Your Advice - Would I be eligible to profit sharing?

February 8, 2010 2:41 AM

Got laid off from a Washington state company last November after just 8 months on the job. Before I joined that company, I was promised a profit sharing plan between 15% to 30% of my base. The offer letter stated that it is "based on company results and is not guaranteed". Right before I left the company, unconfirmed news was that there WOULD be a profit sharing after year-end as the company was doing pretty well.

So shall I pursue this profit sharing money for the eight months I work there? The amount could be substantial.

Also do I have any legal right on this? Based on the work I did in that company, I am fairly sure that there wasn't any internal company policy on this. I also checked WA Department of Labor and there is no guidance as well.

posted by kingfish to Work & Money (8 answers total)

Profit sharing compensation plans are generally made to specify the spoils will be paid the next fiscal year based on previous fiscal year.

In my experience, most contracts spell it out clearly you must be employed for the whole previous fiscal year to receive the profit share, however if it is not in your contract or employee handbook, you should be entitled at the very least some compensation and at best the full 8/12ths share based on company results.

My advice, and I am not a lawyer, is to find out for certain profit sharing has gone forward and then to contact the HR department with your claim if there are no clear guidelines in your contract or employee handbook.
posted by Funmonkey1 at 3:00 AM on February 8, 2010

2nd'ing Funmonkey1. All profit sharing plans I've had were contingent on being employed for the entire fiscal year of the plan period (and one that also required being employed at the time of the payout, which was 4 months after the fiscal year ended).

Even though you may not have seen a document covering this, there likely was. Contact the company for clarification and documentation first to see what your options may be.
posted by qwip at 3:59 AM on February 8, 2010

WE WILL PAY YOU^* AN ENORMOUS^† AMOUNT OF MONEY

^{*Conditions apply.
†Adjective for illustrative purposes only.}

Always read your conditions of employment, and seek written clarification of any parts you don't understand. Always, always, always. Failure to do so can be very expensive.
posted by flabdablet at 4:29 AM on February 8, 2010

Given that the company is doing pretty well, as you say, and yet you were "laid off," they might have just fired you because it wasn't working out. Calling it a lay off is sometimes a way to get someone off payroll without the drama and hassle of firing them, even if that means the company typically pays unemployment. There may not be any ill will at this point. Going after that bonus might burn some bridges that you might need for networking or references.
posted by pomegranate at 4:42 AM on February 8, 2010

Profit sharing at my previous company was paid on a pro-rated basis for how much of the year you were employed, and contingent upon your still being an employee on the date the profit sharing was paid out. This is common, and almost certainly how your ex-employer does it.
posted by Lokheed at 4:49 AM on February 8, 2010

Being an employee at the time of the payment is generally required. Although there are likely exceptions to this, as an HR manager I've never seen one.
posted by saradarlin at 7:07 AM on February 8, 2010

I don't know details about the situation or the nature of the company, but am I the only one here wondering if perhaps they let the OP go because he wasn't essential and the profit split would be "substantial?" Sounds like an easy way for management to get more money in the short term to me.
posted by Elminster24 at 9:48 AM on February 8, 2010

In addition to the above statements about being employed when the profit sharing takes place, companies I've worked for where we got pre-tax income in addition to salary (profit sharing, 401K matching funds), there was a "vesting period" of five years. So, even if I got a portion of profit sharing after a year, I'd only be able to access 20% of it, and then an additional 20% every year after that until I'd reached 5 years of employment and the whole 100%.
posted by LionIndex at 7:24 PM on February 8, 2010