What to include during past salary negotiations

January 14, 2012 11:38 AM

Do year-end bonuses and one-time bonuses count towards salary when discussing past pay with a prospective new employer?

I have a base salary plus a year-end merit bonus that's calculated as a % of base based on performance.

If I'm interviewing for a new firm and they want to know my past salary, then I would obviously include the base + bonus, correct (since it's pretty much guaranteed comp)?

But, I'm in a situation where I'm getting a series of one-time bonuses that were not guaranteed in my contract and they're being grossed up for taxes. So, for example, let's say my grossed-up bonus is $1,000 after taxes. Then I'm theoretically getting $1,300+ before taxes. Would that before-tax bonus of $1,300+ count towards my income as well?

I'm just wondering if it's allowed/ethical to include such one-off bonuses to, I guess, inflate your past pay in order to secure a higher compensation package with a prospective new employer.

Thoughts? Thanks!

posted by 6spd to Work & Money (12 answers total)

"My total gross last year was $X."
posted by DarlingBri at 11:43 AM on January 14, 2012 [2 favorites]

Agree with Darlingbri. "My total compensation last year was $x which consisted of salary and mostly guaranteed bonus."

If they are asking about salary only, not compensation, then break it into the three categories and explain that the guaranteed bonus part was done for planning purposes for the employer so as not to affect the salary scale of their other employees, but was agreed from the outset as part of your value to the firm and thus guaranteed.
posted by JohnnyGunn at 11:50 AM on January 14, 2012

The phrase you are looking for is "total compensation."

TC includes: pay grade related bonuses, company/team/division bonuses, spot bonuses, stock packages (including growth prospects), base pay, ESPP benefits, 401k matching, and valuations of other perks, including (if you really want to pick nits) differences in medical copay, life insurance bundling, and so on.
posted by rr at 11:53 AM on January 14, 2012 [1 favorite]

Another term I've seen used is "salary package" to indicate the whole amount. In my husband's case that included bonuses like you're describing, in my case it includes a couple of allowances (which are indistinguishable from my salary at my end). Either way we get paid the amount we get paid for a year, and that's the base for any future negotiations.

I doubt you need to break it down, that seems like too much information, just tell them the total gross you were paid last year. Your new job may end up doing the same thing too, by the way, give you a lower salary made up with bonuses or whatever, and they'll still be selling you on the total package.
posted by shelleycat at 11:58 AM on January 14, 2012

I don't see an ethical problem. The bonus is part of your compensation. You may or may not receive that next year, just as you may or may not get a raise next year.

I recently had a salary negotiation with a prospective employer. I had a salary last year of $x and received a bonus of $y. I told them that I was paid $(x+y) last year because it was, and told them the benefits I received (ie, full health care coverage, 401k, pension, etc).

If they asked about bonuses, of course I would have been honest, but I was looking for them to do better than the total compensation package, so it wouldn't make any sense to downgrade how much I'd made.
posted by lunasol at 11:59 AM on January 14, 2012

Response by poster: Thanks for the responses. I guess I'll just go ahead and give you some of my numbers because the one-time bonuses in addition to my base salary would make my overall compensation a lot higher than would be expected for someone in my entry-level job.

My current base salary is a little over $60K, but with all these bonuses I'm getting, my total gross pay before taxes will push it slightly over six figures. This is for an entry level job and if I start looking for my next opportunity, I doubt it will pay close to six figures. By the way, I'm not in investment banking where these huge bonuses push base comps over six figures. I'm getting a SERIES of one-time, medium-sized bonuses. And this is only for this year. It won't happen again.

So, my concern is, if I'm applying for a job that pays maybe $80K a year, I don't see how the company would match my past pay and boost my comp to over six figures, whether it be by bonuses or a higher base salary.

Further, as mentioned earlier, these one-time bonuses are only happening this year and they certainly are not to be expected again. Next year, for example, my gross compensation will be far less and normalized -- back to the base comp + % bonus and I definitely won't hit close to six figures.

Does that mean I should strategize my job search such that I exit after this year (i.e. I should apply for a job in 2013 so they can ask for my 2012 compensation that includes these multiple bonuses)?

I'm just trying to think about my earning potential/trajectory and I think this could be an excellent way to 'artificially' accelerate my pay progression by taking advantage of this year's higher-than-normal compensation and using it as a starting point for negotiations.

Thoughts? And sorry for including the numbers.. I don't mean to be tasteless; I just think giving the actual numbers adds a lot of color that make my situation easier to understand than just saying "I typically make $XX,000 but this year I'm on track to earn $XXX,000," as that could mean $25,000 to $100,000, which is pretty outrageous, or $90,000 to $100,000 which is understandable.
posted by 6spd at 12:19 PM on January 14, 2012

What the employer really wants to know is whether they can afford you, and perhaps what kind of an offer you'd accept.

At your end if you are willing to accept the job for less money than you made last year, I'd try to convey that directly. Maybe say something like: "My total compensation last year was $X, but I realize that's unusual and I'm not necessarily looking to match that." Or leave it more open: "I'm looking for $X - $Y, though I actually made a lot more than that last year".

Including your bonuses in the discussion is perfectly ethical. The only concern really is that you don't leave them thinking that they want you but perhaps they'd better offer the job to someone else because you might end up discontented or not stick around because of being able do better elsewhere.
posted by philipy at 12:40 PM on January 14, 2012 [1 favorite]

Say whatever you want. There's not a salary reporting bureau somewhere - at best, in some states, your previous employer can confirm base salary. If you feel it's better, on a case by case basis, to go with a number that is lower than your total compensation, do that.
posted by Lyn Never at 1:04 PM on January 14, 2012

If you're putting non-required work on your resume, then you can put non-required pay in your salary. And I can't imagine you're not doing the former. You want to impress these people with how awesome you are and how much it's going to cost them not only to get you, but to get you to continue to be that awesome.
posted by Etrigan at 1:40 PM on January 14, 2012

Best answer: Lyn Never, that advice would easily lose OP the job if she were to put down something untrue and the discrepancy came up in the post-offer background check. I have definitely seen proof of W2 or HR comp check required to verify what someone was making.

OP, if you know that by demanding a match for your past comp you're going to price yourself out of the market, you just tell the truth and append an extra piece of paper to the application if you have to. "Total comp last year was ~106K, of which $60K was base salary, and some of which was a result of a unique bonus year. I would like my comp to total between $75-90K in 2012." (Or whatever the numbers are for you.) Don't lie.
posted by fingersandtoes at 2:19 PM on January 14, 2012

Best answer: I'm getting a SERIES of one-time, medium-sized bonuses. And this is only for this year. It won't happen again.

You should ponder this statement. Generally speaking, many employers use logic of "this is special, not part of your package" for things that are, in fact, not special. As an example, many employers right now are offering significant hiring bonuses to engineers. These are "special" in that they "wont be repeated" but in reality they can and often will be repeated with different names and instantiations (signing bonus $ amortized over three years become retention bonuses paid out over N years, etc.).
posted by rr at 3:35 PM on January 14, 2012

I've just done this for a move I'm making and used Total Compensation as the basis. I also used Net salary as I'll be moving tax regimes as well. Don't focus soley on the pay side of things, the benefits can be worth just as much in some companies so make sure that matches up too.
posted by arcticseal at 6:24 AM on January 15, 2012