“If I give in my notice of resignation, effective in two weeks, and bonuses are due in one week, can I lose my bonus?”
Published on March 4th, 2010 by Alan L Sklover
Question: Hi, Alan. I just discovered your blog, wonderful! I have a question that seems very common, but I didn’t quite find an answer for it on your site.
I have been offered a new job and they want me to start as soon as possible. It would be OK for me to start April 1. However, it’s also “bonus season,” and my present employer pays bonuses on March 30th. I would like to respect the usual two-week notice period. The bonus plan language says “You will not be eligible for bonus if you resign your employment before the payment date.” The way I figure, since technically my resignation is not effective until after the bonuses are paid, I should be safe.
If I give my present employer two weeks notice on March 16, which means I will still be employed by them on March 30, will my bonus be protected, or jeopardized?
Name Withheld
Oakland, California
Answer: I am very glad you came upon our blog, because otherwise you might not have your bonus.
For three reasons, I am certain – at least 99.9% certain – that you will LOSE YOUR BONUS if you provide notice of resignation before you receive the bonus amount:
First, the language of the Bonus Plan is not clear, but I think the more logical reading is this: If you give NOTICE of resignation before payment date, you will lose your bonus. That is, the more common sense reading is SUBMISSION of resignation, not effectiveness of resignation.
Second, in my many years of advising and representing people on bonus issues, I have many, many times seen people in your exact situation: every single one who took a chance and submitted notice of resignation before the bonus payment, indeed, LOST the bonus payment.
Third, understand that bonuses are paid to reward past performance, but from the employer’s perspective, they have a more important purpose: to incentivize future efforts. For someone who they know is leaving, that second – and more important – purpose is gone.
Please, please, please do not give notice of resignation until you have received your bonus. In fact I go further in counseling my own clients: You should not give notice of resignation until (a) the money is in your account, AND (b) you have moved it to a different bank. Why? That is because, if an employer auto-deposits payments into your bank account, that same employer can – and they sometimes do – take it out later. I’ve seen that happen, even six months later. I counsel clients in your situation to leave only $10 or so, to prevent just that.
As to the “timing” of your transition, I would tell your new employer that you cannot leave your bonus “on the table,” and for this reason you can’t start until the first or second week in April. If your prospective employer really balks at that, you can ask them, “Well, then, would you put into writing that, if I lose out on my bonus, you will pay that amount to me, to ‘make me whole?’” Most employers will just as soon wait the extra week or two.
Thanks for submitting this question. It is a very, very common dilemma, and a question that I am asked by my clients very often, especially this time of year, that is, “bonus season.”
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Best, Al Sklover
© 2010 Alan L. Sklover, All Rights Reserved.
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I think you should consult an attorney that resides in your jurisdiction on this one. In our jurisdiction the courts, for the last 5 years, have ruled that if a bonus is based on specific performance criteria, with a specific time for completion of the performance, then that bonus is considered wages. This applies REGARDLESS of whether an employer attempts to say the bonus was “discretionary” or any other wording commonly used in an attempt to not have to pay a bonus. Because it is considered wages, the employer is liable for penalties and interest if not paid within 15 days of date performance was completed.
Both Alan and K Montana are right and have given good advice which is the reason I would also advice as Al has that you wait to get your bonus before submitting you resignation letter. As an HR Practitioner, I have had to handle similar situations like yours and it often depends on the wording on the eligibility of payment of bonus plans and quite often, because the plans don’t always spell it out as you think which is “if an employee leaves the company before the payment of bonus, they will forfeit the right or will not be eligible to receive payment”. It doesn’t state that eligibility is based on the “effective date of resignation” which is how companies might just get away from not making payment. Having stated that, common sense will dictate that if an employee has worked and earned their bonus during the period under review, they will receive payment irrespective of whether they resigned or not. It often baffles me why anyone would not wait to receive their bonus for which they have worked before resigning if the resignation date is close to the date of bonus payments. That way you avoid any unnecessary legal wrangling that may arise. Best wishes & Good luck in your new job! Have a merry christmas & happy holidays!