A friend of mine (who has been unemployed for over a year) was recently offered a job in her field with a good company.She didn’t take it. I was floored that someone who has been out of work for over a year would not snap up a job like this.
“I didn’t like the bonus plan,” she said.
“Excuse me?” was all I could manage.
“The benefits were all great. Good salary, heath insurance, dental, 401K, vacation, and sick leave, but the bonus plan was a loser,” she said.
“How so,” I asked.
“Well, instead of giving you cash at the end of the year if the firm meets its goals, they put the bonus into your 401K account.’
This didn’t seem horrible to me and I said so.
“Yeah, but if you don’t participate in the 401K, you don’t get the bonus.”
I was still trying to figure out the problem. “So? Participate. Are they making you put in the full fifteen percent or something to get the bonus?” That was the only way that I could see this being a problem and even then, that was stretching it.
“No, you can put in as little or as much as you want. You just have to be actively enrolled in it for the year that the bonuses are given out. ”
(I should note here that the company also offered a match on 401K contributions, in addition to the bonus. So you would get some free money every paycheck, plus a bigger lump sum amount at the end of the year. Their generosity in this economy blew me away.)
“And you didn’t take the job because of this?” I asked.
“Well, yeah. I mean when I get a bonus it’s for me. I want to spend it on something fun like travel or new clothes. Putting it in a 401K that I can’t touch until I retire is boring. They shouldn’t get to force me to do something with my money.”
At that point I had to walk away to keep from slapping this person. Who turns down an otherwise great job because of this? So I asked a few more people if this would bother them. To my shock, six out of eight people said that it would really bother them, although only one other said they wouldn’t take a job because of it. One person did say that they could kind of see my friend’s point. “It does stink to have the company dictating what you can do with your bonus money and, beyond that, essentially forcing you to participate in the 401K to get it. It’s like they’re holding all the cards.”
I really have to wonder about this. First of all, that this company offers a bonus plan at all makes it better than many. Bonus plans are hard to come by these days. That someone will just give you extra money in any form at the end of the year is beyond the norm. I can’t see turning down the chance to pad my accounts with free money, whether it’s in the form of a check or a 401K contribution, as making any kind of sense.
As for the idea that you can’t spend it until you’re old, or that the company is somehow holding your bonus money hostage, well, so what? It’s their company and their rules. Besides, too many people aren’t contributing nearly enough to their retirement as it is. I look at it a different way. I think this company is saying, “Hey. We won’t be providing you a pension when you’re older, so we want you to take responsibility for your old age now and we’re going to help you by encouraging you to save in the 401K, matching that every pay period, and then giving you extra money on top of it.” That kind of generosity and concern for employees is pretty scarce these days. I don’t think they’re doing it to be punitive, I think they’re doing it to be helpful
Finally, a bonus is just that. It’s not something you should count on or expect. Therefore, it should have no place in your regular spending plan. If you want to travel or buy gadgets or clothes, you need to include those in your budget and make sacrifices elsewhere or find another way to bring in regular income. Relying on the bonus to take care of your wants is a dangerous proposition. Besides, you’ll have wants when you’re older and won’t it be nice to have some extra money then?
I still can’t believe my friend turned down the job. Try as I might to see this bonus plan as the “loser” she claimed it to be, I just can’t. I can’t see that free money in any fashion is a bad thing. Might it be fun to blow a bonus on something frivolous? I guess so, but having never had a bonus plan I can’t say for sure. But it’s also great to have some help in setting aside money for your future needs. Personally, I’ll take the free money any day and any way a company wants to give it to me. That my friend turned down this job merely shows how out of whack her financial priorities are and explains why she so frequently has to borrow money.
So I’m putting it to my readers because I’m really curious about this. Would you have accepted this job, or is this bonus plan a deal killer for you?