Investment bank guaranteed bonuses

Saw an article stating the comp pool for many IBs is down due to the guaranteed bonus structure. Having never had a silver spoon up my a*se/family connections/the talent/yadda yadda whatever, i’ve never been fortunate to land any gig with a guaranteed bonus. But I do wonder how it works. I have to make do with a non-guaranteed bonus, pauper that I am. How do negotiations begin with a gtd bonus? Does the banker ask for the bonus as part of package, or is it offered at the get go? What does it depend on? Bringing in a client base? Why isnt it just given out as salary? I suspect im being naive here.

Why do they still call it “bonus” if it’s guaranteed? Why not call it an outright salary?

Its simple skippy. Has to do with tax reasons.

taxes…taxes, taxes.

Taxes? Explain please. I get taxed on my unguaranteed bonus just as if it was salary. It still shows up on my annual income statement. In fact, a one off bonus payment is worse as it pushes you up the tax bands. A bonus distributed as smaller monthly amounts in the form of a salary = smaller taxable amounts.

Any amount over $1MM in salary for an individual is not tax deductible by the firm. So firms put in guaranteed bonuses that function as salary but get around the silly loophole.

Ah that explains alot, thanks juventurd. Don’t have that kind of loopholes over here

Banks guarantee bonuses for new MBAs. They usually get a 40k sign-on and $40K guaranteed bonus give or take $5K. I would imagin it’s a payroll tax or issue or something like that.

Bo-nus? I’m not familiar with the term. Can someone explain? :-/

I still wouldn’t consider a bonus “guaranteed” in my budget. My “guaranteed” bonus was taken away, so Friday is my last day here. Nothing that isn’t paid like actual salary is guaranteed.

There are lots of reasons giving a guaranteed bonus, and not salary. Most common is you hire someone from another shop in mid year, in a job where the comp is performance-based. You guraantee the bonus in year 1 becuase he will assert that its the amount he would have received that year if they had not switched jobs. It then protects the company if in year two the employee doesn’t produce. Kkent - A guaranteed bonus is done in writing. It’sa contract, so its guaranteed. If not in writing its BS. Also, most retirment plans (401K, pensions, etc.) are based on salary, not total comp, anfd typically (but not always) employer rpovided disability coverage and life insuarnce is based on salary alone.

It also helps your employees get mortgages, etc…

Thanks Juventurd - so its basically a benefit to the bank rather than the employee to structure it this way.

Muddahudda Wrote: ------------------------------------------------------- > Thanks Juventurd - so its basically a benefit to > the bank rather than the employee to structure it > this way. This is common for any company (not just banks) for C-level execs that they want to pay in excess of $1MM. They wouldn’t do this for traders, pm’s etc.

Muddahudda Wrote: ------------------------------------------------------- > Thanks Juventurd - so its basically a benefit to > the bank rather than the employee to structure it > this way. You can pretty much apply that rule to anything a bank does.

No, sir. Guaranteed bonuses can still be taken away so long as it’s not salary. Mine is in writing. Mine is gone. So I assure you, a guaranteed bonus is not guaranteed. At least not in 2009.

kkent, you can always sue, but you’d be facing guys like this in court.

buyicide - I’m assuming that $40K is a stub bonus, correct? One of the large int. banks switched their comp structure to $140K base for associates ($50K sign-on)…not sure if this will be the trend at every bank. Curious to see what my friends who are finishing their summer associate programs are offered at the various banks.

yeah its a stub… I know mbas for 08 and 09 got 10k moving 40k sign on 95k salary and 40-50k stub