Ooops.... I spent it all..

December 15, 2006 4:54 PM

How likely is it for a company to make you pay back the sign on bonus? There's

I'm considering an offer from a large public technology company that you would know. It's likely I will be leaving the company in August or September to go to graduate school next year. However, their offer seems to indicate I have to pay back all the sign on bonus if I leave. I will probably work about 8-9 months. What I'm wondering is, how often do companies actually do this? What if I don't have the money when they ask for it? Will they just forget? Can I change the wording on the offer letter before sending it back?

The exact wording is:

You will receive a sign on bonus in the amount of [$n]. This will be payable 15 days after your employment start date and is subject to applicable tax withholdings. If you choose to leave [company] for any reason during the first twelve months of your employment, this bonus will become due and payable to [company] on your last day of employment.

posted by anonymous to work & money (24 comments total)

I guarantee you they won't forget. I wouldn't take the job if you couldn't afford to pay back the bonus.

And, although they'll probably give you the bonus net (after taxes), you'll be responsible for paying the entire bonus back - for instance, if you got $7500 of a $10K bonus after taxes, you're still on the hook to repay the entire $10K.
posted by pdb at 5:02 PM on December 15, 2006

Yes, they will make you pay it back.. but you actually pay back more than they give you.

Sign on bonus: $15k. After taxes you get what? 12k? When you leave, you owe them $15k still.. so you need to pay back $3k more than you received.

Just decline the sign on bonus.
posted by SirStan at 5:03 PM on December 15, 2006

My experience is that you will be required to pay it back. They'll withhold your last pay, for sure. They will also bill you for any outstanding amount. If you don't pay, their law firm on retainer will approach you. You will be dogged by them until you do.

If you know you are going to leave, you might put the bonus in a savings account and then pay it back at the end (keeping the interest, of course).

There may be a situation where they won't ask for it back, but I have never seen any company not at least try to get it back.

The alternative is to perhaps ask for a lower bonus without the payback condition (or at least a shorter limit). Or you could just ask for an increase in salary instead of a signing bonus. Could be hard, as the company may budget those expenses differently.
posted by qwip at 5:11 PM on December 15, 2006

I forgot about the taxes part, but you likely will get that back when you reduce your actual income on your taxes after paying back the bonus. Don't know for sure, so ask an accountant if you are dead set on trying this.
posted by qwip at 5:13 PM on December 15, 2006

Yes, they'll ask for the money back.

More importantly, why are you accepting a job such as this if you only intend on staying for nine months? They obviously expect you to stay for longer than a year and you're thus already starting on a bad foot as the work relationship goes. Depending on the tone of departure, you may not leave with a worthwhile reference. A short stint at a well-known company can sometimes look worse than no mention of that company at all, as well, so it may not even be a good resume builder.
posted by VulcanMike at 5:43 PM on December 15, 2006

I'd suggest either not taking the job, or put off Grad school for either a semester or a year. Good job history counts.
posted by edgeways at 5:49 PM on December 15, 2006

They will absolutely expect you to pay your bonus back if you don't uphold your end of your employment agreement (you know, the one that says that while they're paying you the bonus 2 weeks into the job, you haven't actually earned it until you've been there 12 months.)

However, all job offers are negotiable until they're signed. You can't just unilaterally change the letter before sending it back, but you can ask them to change the letter and give you an offer without the bonus (or perhaps a smaller bonus that's only contingent on 6 months of service, if they really like you).

With that said, big technology companies generally don't like to hire people if they know they're only going to stick around 8 or 9 months. If I were the hiring manager, and someone refused a signing bonus like this, I'd start thinking very seriously about my second choice candidates (because almost the only reason someone would turn this kind of thing down if if they know already that they'll be at the company less than a year).

By the time they've got you fully trained and up to speed on their projects, you're going to be mostly out the door -- this makes you at best, a marginal hire, which is part of what this (not at all uncommon) bonus structure is designed to weed out.

FWIW, you're likely to be a better grad student with 20-21 months of industry experience under your belt. If the job's a good one (interesting work, interesting people, career-boosting big-name company), you might want to consider waiting a year to continue school.
posted by toxic at 5:57 PM on December 15, 2006

If you ask them to simply not pay you the bonus until your anniversary date, would they take it as a bad sign, or indicative that you're not confident managing money? Or would they understand?
posted by Myself at 6:06 PM on December 15, 2006

When I left a major US bank after 9 months, I had to payback the after-tax amount of my signing bonus. But the after-tax language was written into my offer letter.

The crappy part is that they were able to pull the amount I owed directly out of my checking account because I had been using direct deposit (which allows your employer to correct "overpayments" without your consent). This resulted in an overdraft and a couple bounced checks. Thankfully, I had enough money in other accounts. So, if you take this job, do not elect to be paid via direct deposit.

Anyway, perhaps it wouldn't be too suspicious if you asked your potential employer to include after-tax language in your offer?
posted by mullacc at 6:08 PM on December 15, 2006

It's likely that you will be able to defer acceptance to grad school for a year, once you get accepted. But to those people saying that your job history counts: it may well not count, as applications for grad school next fall are due right about now, so recommendations and information about this job won't be on it.
posted by advil at 6:32 PM on December 15, 2006

If you ask them to simply not pay you the bonus until your anniversary date, would they take it as a bad sign

This hiring manager probably would.

If I'm filling a position that's important enough (or hard enough to fill) that it warrants a signing bonus, I'm going to be looking for someone who's willing to make a commitment to the job (and to the company). One year isn't all that long, and isn't all that unusual -- and if you want this job to look halfway decent on a resume, you're going to want to hold it for a year or more anyway. If your commitment seems shaky, I'm going to be concerned -- and I'm not likely to remove any incentives that I've put in place to retain you.

However, I wouldn't blink if asked to change the language such that you only owed back the after-tax portion. If someone asked me that, they'd have a revised letter within the hour.

Next time (and for those reading along), tell your potential employers about your grad school aspirations, as soon as it becomes apparent that they're interested in hiring you. You can be vague about your timing ("I'm considering a masters degree, possibly as early as this fall while undergraduate work is still fresh, but almost certainly within the next few years. Does the company have any policies about employees and higher education?")

You'd be surprised how many companies will consider paying for some or all of school, in exchange for you working for the company during breaks and for a predetermined period of time after graduation -- but you've got to be up front about it.

In your case, I'd bet your signing bonus would have become a larger tuition bonus, contingent on your working for the company for one year after graduation. At least, that's what it would be if I were hiring you, and you were a worthy candidate.
posted by toxic at 6:54 PM on December 15, 2006

The company I work for sued a senior manager who left after less than a year in order to recover a signing bonus, annual bonus and moving allowance. And the company won. And got a lien on property he held in another province. Don't know where it's gone from there.

The company I work for has a long string of "Top 10/50/100 Employers to Work for in Canada" awards, so it's not like we're known for being heartless and adversarial.

I'd say that the odds are good that you'd have to repay the signing bonus.
posted by solid-one-love at 7:58 PM on December 15, 2006

Obviously, they will want the bonus back. How I would handle your situation would depend solely on the size of the bonus. If it were only $1,000, I'd say bank it and then pay it back when you leave. However, if it were $10,000, I'd say put school off for a semester to get past your anniversary date. A sum like $10,000 would really help pay your rent while you go to school.
posted by bda1972 at 10:00 PM on December 15, 2006

Hmmm. Myself, I'd be a little aggressive on this one - that part of your offer letter that reads "If you choose to leave [company] for any reason during the first twelve months of your employment, this bonus will become due and payable to [company] on your last day of employment."

Cross it out, initial and date the eradication, then sign and return the letter but DO NOT bring this alteration to their attention.

Many HR departments are totally overwhelmed with work, and lots of the functions are outsourced these days; this might just slide through, in which case they've accepted your terms.

If they notice then you'll have to engage more detailed negotiations.
posted by Mutant at 1:04 AM on December 16, 2006

IANAL, but Mutant's advice sounds really really close to fraud to me. That is really underhanded. Also, I would bet that the crossout wouldn't be valid anyway without the initials of someone from their side.
posted by breath at 1:30 AM on December 16, 2006

I would bet that the crossout wouldn't be valid anyway without the initials of someone from their side.

Most certainly. A valid contract must have all the major provisions agreed to by both parties.
posted by Civil_Disobedient at 2:25 AM on December 16, 2006

My roommate just got done paying back over $5k in a signing bonus he owed a major US-based computer hardware company after he quit early. Another vote for "they'll remember".
posted by adamk at 3:11 AM on December 16, 2006

Oh hell yes they will remember.

If it's a nice enough bonus, why don't you put off grad school for 1 more year, take the sign on bonus, and invest it into an ING account or some high-yield savings account? That way you get the bonus, your employer is happy because you stayed there at least a year, and you'll have some extra cash to put towards grad school in addition to having something nice on the resume.

Sounds like a decent plan to me.
posted by drstein at 9:10 AM on December 16, 2006

Ah, I forgot to mention - if you get laid off, chances are they won't expect you to pay it back. Not 'fired' but laid off. I had a few friends at Netscape/AOL and when they were laid off just after the Time-Warner fiasco, none of them had to pay back sign on bonuses or moving expenses.
posted by drstein at 9:17 AM on December 16, 2006

BTW, even if they did forget and you kept the money, you'd still be committing theft. You really have no moral ground to stand on here.
posted by tkolar at 10:04 AM on December 16, 2006

BTW, even if they did forget and you kept the money, you'd still be committing theft.

No, he wouldn't be. Theft is a criminal act. The company's only redress would be civil.
posted by solid-one-love at 1:15 PM on December 16, 2006

solid-one-love writes...
No, he wouldn't be. Theft is a criminal act. The company's only redress would be civil.

I stand corrected. Because what you would doing wouldn't meet the legal definition of theft under U.S. Penal code, you actually would not be stealing someone else's money. Morally you're in the clear here, so please go ahead.
posted by tkolar at 4:14 PM on December 16, 2006

I wasn't speaking to the act's morality, tkolar; you may have missed the fact that I did not quote your second sentence. I was correcting what was either an error or exaggeration, neither of which are useful.
posted by solid-one-love at 4:52 PM on December 16, 2006

"...Mutant's advice sounds really really close to fraud to me..."

Uhhmmm, not really. He's still negotiating until the contract is, as someone else pointed out, signed by both parties. If they execute on the contract with his terms it's their problem not his.

You know the fine print that many of us don't read? Being held to it after the fact? Same principle applies here.

This is just business. And this is a relatively minor infraction. I've seen far, far worse during some contract negotiations I've participated in.

Good faith, if he did execute, surely could be called into question. But would they try to recover the money after the fact? I bet no, solely now because it's not so clear cut. Someone at the firm would have fucked up by not calling the proposed alteration by the counterparty into question.

That question surely would be raised in court, and they wouldn't want their own lack of internal controls formally documented and out in the open.

They wouldn't like it, but a large company like this would probably back down real fast.
posted by Mutant at 1:05 AM on December 17, 2006