Cash it? Shred it?
November 26, 2007 12:22 PM Subscribe
Job/bonus question: Have a "retention bonus" check on my desk for work in 2007, but am considering leaving for competing organization. What to do with the check?
Boss couldn't get mgmt of company to give us regular end-of-company-year bonuses to the amount promised, but he managed to wrangle the funds from the company via "retention" bonuses. So, expecting to stay, I signed an agreement that says that if I leave over the next two years, I'd have to return (minus taxes) the money. Now I'm being courted with a great offer by a solid competitor, and it would be a good career move to go; the check just arrived today, and taxes have already been taken out-- the remainder is sitting here.
Assuming I'm going, should I not cash the check? How valid are these contracts? I did the work, after all, but I also realized that I signed that agreement. And what about the money that just went to taxes? (If I return the rest, does the money sent to the gov remain with them and offset other income received?)
Boss couldn't get mgmt of company to give us regular end-of-company-year bonuses to the amount promised, but he managed to wrangle the funds from the company via "retention" bonuses. So, expecting to stay, I signed an agreement that says that if I leave over the next two years, I'd have to return (minus taxes) the money. Now I'm being courted with a great offer by a solid competitor, and it would be a good career move to go; the check just arrived today, and taxes have already been taken out-- the remainder is sitting here.
Assuming I'm going, should I not cash the check? How valid are these contracts? I did the work, after all, but I also realized that I signed that agreement. And what about the money that just went to taxes? (If I return the rest, does the money sent to the gov remain with them and offset other income received?)
I'm not a lawyer, and I don't know of any obvious way to get out of your agreement.
Assuming there is no way to get out of the agreement, I would say you should cash the check and but it in a high yield savings account.
Since your move to the competitor isn't official yet, don't assume that you will definitely move there. For example, when you get an actual offer in writing from the competitor, you could tell your employer about it, and they may give you an even better offer to stay. If you do end up staying, you can just keep the money.
If you do end up leaving, it might take a while and you might have a decent sized window to give the money back without paying any interest. Take advantage of that time to earn some interest on the money before you give it back.
posted by burnmp3s at 12:40 PM on November 26, 2007 [2 favorites]
Assuming there is no way to get out of the agreement, I would say you should cash the check and but it in a high yield savings account.
Since your move to the competitor isn't official yet, don't assume that you will definitely move there. For example, when you get an actual offer in writing from the competitor, you could tell your employer about it, and they may give you an even better offer to stay. If you do end up staying, you can just keep the money.
If you do end up leaving, it might take a while and you might have a decent sized window to give the money back without paying any interest. Take advantage of that time to earn some interest on the money before you give it back.
posted by burnmp3s at 12:40 PM on November 26, 2007 [2 favorites]
What are the terms of returning the money? 30-days? 60-days? A year?
I'd take the job and then take acoutu's advice above. You could probably pocket A few hundred, maybe even a few thousand in interest if you can stall them on returning it...
posted by wfrgms at 12:55 PM on November 26, 2007
I'd take the job and then take acoutu's advice above. You could probably pocket A few hundred, maybe even a few thousand in interest if you can stall them on returning it...
posted by wfrgms at 12:55 PM on November 26, 2007
I signed an agreement that says that if I leave over the next two years, I'd have to return (minus taxes) the money.
I'm sorry, you're saying you agreed to give back the money if you leave, you're leaving, and you're asking whether you should give back the money?
Give it back. The withholding is not your problem, and is a poor excuse for a rationalization.
posted by stupidsexyFlanders at 12:59 PM on November 26, 2007
I'm sorry, you're saying you agreed to give back the money if you leave, you're leaving, and you're asking whether you should give back the money?
Give it back. The withholding is not your problem, and is a poor excuse for a rationalization.
posted by stupidsexyFlanders at 12:59 PM on November 26, 2007
Response by poster: Addt'l detail: The job offer is solid, and I'm fairly certain I should accept.
The agreement I signed notes: If I "leave within 24 months, [I] will agree to pay back a prorated, tax adjusted portion of this bonus." That is the only reference or detail, as it's a short letter.
And I'm bothering will all of this because it's a pretty big check-- over $5K after tax.
posted by Arch1 at 1:12 PM on November 26, 2007
The agreement I signed notes: If I "leave within 24 months, [I] will agree to pay back a prorated, tax adjusted portion of this bonus." That is the only reference or detail, as it's a short letter.
And I'm bothering will all of this because it's a pretty big check-- over $5K after tax.
posted by Arch1 at 1:12 PM on November 26, 2007
Response by poster: That would be "with all"... sigh.
posted by Arch1 at 1:12 PM on November 26, 2007
posted by Arch1 at 1:12 PM on November 26, 2007
I know I'm an idiot here, but what does this do to your taxes? It sounds like the company (and you) have already paid taxes on this bonus. Does it alter your tax bracket? Paying it back seems, to me, that you get all the tax woes with none of the cash benefit.
posted by jdfan at 1:17 PM on November 26, 2007
posted by jdfan at 1:17 PM on November 26, 2007
I'm sorry, but you're an adult, you can't have both the money and the amazing job offer, so choose one. If you're planning to take the offer and leave soon, then a high interest acct won't earn you much anyway. In regards to the validity of the contract, why wouldn't it be valid? The company made you sign it so you wouldn't take the money and run, like you seem to want us to give you permission to do. Seriously?
posted by Asherah at 1:19 PM on November 26, 2007
posted by Asherah at 1:19 PM on November 26, 2007
Best answer: If you plan to accept in the short term, hold on to the check, then return it to the employer uncashed. The interest will be negligible, if you comply in a timely way with your obligations. This will be seen as a solid, upright thing to do, and may serve your longer term interests.
I think what you are mainly asking is whether the conditions for retaining the money are binding on you. This is probably impossible to say without a lot more facts, but there is no particular reason to think that you're free to ignore them. In your mind, you are owed the money for work you already did; but you have already agreed that the money is a refundable bonus.
Or perhaps you are wondering whether the company will forget you have the money, which seems doubtful.
posted by Clyde Mnestra at 1:21 PM on November 26, 2007
I think what you are mainly asking is whether the conditions for retaining the money are binding on you. This is probably impossible to say without a lot more facts, but there is no particular reason to think that you're free to ignore them. In your mind, you are owed the money for work you already did; but you have already agreed that the money is a refundable bonus.
Or perhaps you are wondering whether the company will forget you have the money, which seems doubtful.
posted by Clyde Mnestra at 1:21 PM on November 26, 2007
Response by poster: I don't mind returning the money... I am not trying to game the system here, and I'd certainly appreciate keeping an open door with this very good employer. (Oddly enough, my boss would want me to have the money either way, as he was geniunely apologetic for the strings when he gave these out in addition to our immediate bonus.)
I'd just like to know if there is any gray territory, such as with non-competes, which are often very stern sounding but generally not able to be enforced. I can certainly contact a tax attorney, but hoped someone here had some experience in this area.
posted by Arch1 at 1:29 PM on November 26, 2007
I'd just like to know if there is any gray territory, such as with non-competes, which are often very stern sounding but generally not able to be enforced. I can certainly contact a tax attorney, but hoped someone here had some experience in this area.
posted by Arch1 at 1:29 PM on November 26, 2007
Response by poster: And again, more interested in the resulting tax situation. Can't even wrap my mind around what this does.
posted by Arch1 at 1:30 PM on November 26, 2007
posted by Arch1 at 1:30 PM on November 26, 2007
Best answer: When an employer withholds tax from your checks, they do just that: Withhold it. That money doesn't get magically wired to the government every two weeks. Therefore, if you relinquish the check back to your employer, you also relinquish back to them the money that they withheld--and are still withholding--that they would have sent to the government on your behalf.
The government hasn't actually SEEN that money yet.
posted by coryinabox at 1:34 PM on November 26, 2007
The government hasn't actually SEEN that money yet.
posted by coryinabox at 1:34 PM on November 26, 2007
Response by poster: Clyde, a classy suggestion, thanks; Ciab... of course [forehead slap]. The stress of the decision is turning my brain to mush. And Asherah, perhaps you could dial it down if you choose to, ah, help someone else in future? Your assumptions on all counts (both about my employer and about me) are way, way off.
posted by Arch1 at 1:51 PM on November 26, 2007
posted by Arch1 at 1:51 PM on November 26, 2007
Yeah, take it back to payroll and let them know you don't want it so they can fix the accounting before tax-reckoning time. And don't declare it as income.
posted by ikkyu2 at 1:59 PM on November 26, 2007
posted by ikkyu2 at 1:59 PM on November 26, 2007
Best answer: If the other place wants you bad enough, negotiate a "hiring bonus" that pretty much equals the "retention bonus"
Sounds simplistic, but could work.
posted by sandra_s at 2:02 PM on November 26, 2007 [1 favorite]
Sounds simplistic, but could work.
posted by sandra_s at 2:02 PM on November 26, 2007 [1 favorite]
Response by poster: Did work, thanks. They matched the bonus-- actually, doubled it. ($30k!) Thanks!
posted by Arch1 at 2:18 PM on November 26, 2007 [2 favorites]
posted by Arch1 at 2:18 PM on November 26, 2007 [2 favorites]
That might be the best answer EVER.
posted by grouse at 2:43 PM on November 26, 2007 [2 favorites]
posted by grouse at 2:43 PM on November 26, 2007 [2 favorites]
If you cash the check, that counts as the legal "consideration" for a contract, and it becomes valid. Otherwise, the contract is not yet "perfected".
Do not cash the check.
posted by torpark at 5:09 PM on November 26, 2007
Do not cash the check.
posted by torpark at 5:09 PM on November 26, 2007
"[I] will agree to pay back a prorated, tax adjusted portion" reads to me as if you should get to keep a portion of it and not have to give up the whole thing. Seems like you should be able to ask your boss for advice, since he is in favor of your having the money.
posted by Vaike at 5:59 PM on November 26, 2007
posted by Vaike at 5:59 PM on November 26, 2007
This thread is closed to new comments.
posted by acoutu at 12:31 PM on November 26, 2007