5 Important Things You Should Know About That Year-End Bonus
This time of year, with all the present buying, snow shoveling and family visiting, rarely do we have a moment to really think through that year-end bonus we hope is coming. But there are some important things you should know about your bonus—before you rely on it to cover the cost of all the gifts you just bought.
You Can’t Count On It
The first important thing to know about year-end bonuses is that you may not get one. If a bonus was negotiated into your contract based on sales or commissions, it’s a good bet that you’ll get it, but you should read that document carefully and make sure you understand the conditions for the bonus. If, where you work, the bonus is just that—extra pay beyond your negotiated salary—then there’s no guarantee your company will hand one out to you, as it is solely at their discretion. Nor is it guaranteed that it will come in the form of cash. Since your company pays taxes on employee salaries, they may choose to reward you with something other than extra money in your paycheck.
You Don’t Get to Keep It All
If you do receive a bonus at the end of the year, don’t run out and spend it all. That bonus is taxable, so the government is going to want their cut. If you’ve been told how much to expect when bonuses are handed out, don’t forget that part of that money will not be yours. Most likely, the tax will already have been taken out of the check and then you’ll probably get some of it back after you file your income taxes. If the taxes aren’t taken out of your check, you aren’t off the hook. You’ll need to set some money aside to cover Uncle Sam’s portion once your company reports all compensation you’ve received during the year.
You Can Improve Your Chances of Getting a Bonus
A year-end bonus doesn’t have to be something you just hope for in December. You can actually improve your chances of receiving one even if it’s not something you negotiated as part of your salary. Just like getting a raise, in order to put yourself in a good position to receive a bonus, you need to work toward it all year long and track what you’re doing throughout the year. Documenting successes and ways you clearly improve the bottom line is a good way to make a strong argument for getting a little boost at the end of the year. Beyond that, communicate with your boss all year long to make sure you’re meeting expectations and to find out what more you could be doing. Then, don’t be afraid to ask about a bonus. Have your documentation ready and discuss how your good work might be rewarded.
You Can Negotiate a Better Bonus
In much the same way that you can even get the idea of a bonus on the table, you can work your way toward a better bonus (something you may want to do if you were disappointed last year). Again, work beyond your minimum expectations and document your achievements and any good feedback you receive from internal and external clients. Be specific; quantify results with hard numbers in language your boss understands. And if you start talking about your bonus early with your boss, you may help your chances of making a strong case for yourself. You will also be more likely not to get to her after she’s already made recommendations for bonus amounts up the ladder. Remember to negotiate a better bonus for yourself by being able to speak clearly about your accomplishments.
Your Bonus Could Determine When You Leave Your Job
When you’re thinking about a job change, it might be easy to forget about considering your year-end bonus, but you could lose it if you leave. If a bonus is negotiated into your salary, especially as a sales or commission amount, when you leave your job could decide what kind of bonus you get, if any. Read your contract closely before you make any decisions. If a bonus isn’t specifically part of your salary, but you usually get one, you may want to stick it out at your job until the bonus period has ended.
Some companies have specific rules about who can receive bonuses. If bonuses are calculated on December 31 and you leave on December 10, you probably won’t get one. Also remember that the bonuses won’t be paid out for a few weeks after the bonus period has ended, so it’s possible you won’t receive one if you don’t still work for the company when the checks are cut. Consult your employee guidelines, or check with your boss when you give your notice. Finally, be careful about waiting to quit after you receive your bonus. The few weeks after bonus time are the most common time for quitting and your boss will know what you did. You want to be careful about burning bridges.