Tell a guaranteed bonus from a discretionary one and find the conditions that could cost you money.
A job offer usually sets out a basic salary and then a group of other payments: an annual bonus, a performance bonus, perhaps a sum for joining. The salary is normally clear. The bonus clauses are where the gap between what you are told and what you are owed is widest. Some of that money is certain, some depends on the company's decision, and some you may have to pay back if you leave early.
Kai Wen is reviewing an offer letter. It lists three kinds of extra money: a thirteenth-month payment, a "performance bonus of up to two months' salary", and a S$10,000 sign-on bonus paid with his first salary. The recruiter calls it a package worth well over S$90,000 a year. When he reads the clauses, he finds that only part of the money is certain, and he might have to pay back part of it.
For any bonus, first ask whether it is contractual or discretionary. A contractual bonus is promised by the contract on stated terms. The usual example is a fixed thirteenth-month payment, often called the annual wage supplement. If the contract says you get one month's salary in December and you meet the conditions, that payment is owed to you like salary.
A discretionary bonus is one the company may pay but does not have to. The wording tells you which kind you are reading. Phrases such as "may be paid", "at the company's discretion", "subject to company and individual performance" and "up to" signal a discretionary bonus. "Up to two months' salary" promises nothing, because zero is also up to two months.
A discretionary bonus still has value, and it may well be paid every year. Even so, do not count on it when you plan, borrow or compare offers. Compare offers on what is contractual, then look at the discretionary part separately.
Kai Wen's thirteenth month is contractual and his performance bonus is discretionary, so the certain part of his package is thirteen months of salary.
Even a contractual bonus usually comes with conditions. The most common is that you must still be employed on the payment date. Many clauses also say you must not be serving notice on that date, whether you resigned or were let go.
The serving-notice condition affects when you should resign. Suppose a bonus is paid in March (a hypothetical illustration). If you resign in February with a month's notice, you are serving notice on the payment date and may lose the whole bonus. If you resign after the bonus is paid, you keep it. The difference can be a month's salary or more, so read the clause for its exact wording and plan any resignation around bonus payment dates and the notice condition.
Check for pro-rating as well. Some contracts pro-rate a contractual bonus for part of a year, for example in your first year. Others pay nothing unless you have completed the full year.
A sign-on bonus is paid when you join, but it often is not fully yours yet. Many come with a clawback clause: if you leave within a set period, you must repay all or part of it. Employer-paid sponsored training, courses and certifications often carry similar clauses, sometimes called training bonds.
A clawback clause should state how long the clawback lasts, whether you repay all of it or a share that shrinks over time, and whether it applies when the company ends your employment as well as when you resign. Pro rata repayment means repaying in proportion to the months remaining in the clawback period. "In full" means repaying the whole amount whenever you leave within the period.
Kai Wen's sign-on clause says that if he leaves within 24 months, he repays the S$10,000 pro rata for the months remaining. If he leaves after 15 months, 9 of the 24 months remain, so he repays S$10,000 x 9 / 24 = S$3,750. If he leaves after 6 months, he repays S$7,500. If the clause had said "in full", leaving at month 23 would cost him the whole S$10,000. Do the same sums for any clawback you are offered, at several points in the period.
Some words sound specific but are not. "Performance-based" does not say whose performance or how it is measured. "At the company's discretion" does not say what the discretion depends on. "Eligible for" does not mean entitled to. "Target bonus" does not mean expected bonus.
Asking will not turn a discretionary bonus into a guaranteed one. You can still ask how the bonus is decided, when it is paid, whether it is pro-rated in your first year, and what the conditions on the payment date are. Ask for the answers in writing, by email if they are not in the contract, so they are on record. Ask before you sign, because after signing you have much less room to negotiate.
Kai Wen asks one question: does the clawback apply if the company lets him go? The recruiter confirms in writing that it applies only if he resigns. His final list of what he is promised beyond basic salary reads:
Thirteenth month: contractual, paid in December, pro-rated in his first year, conditional on being employed and not serving notice. Performance bonus: discretionary, up to two months. Sign-on bonus: S$10,000, clawed back pro rata over 24 months if he resigns.
The list is short and much clearer than the recruiter's summary. The package is still a good offer, and he now knows which parts he can plan on and what leaving at any point would cost him.
Have your own contract or offer letter beside you, and look for every clause that mentions a payment beyond basic salary. For each one, decide from its wording whether it is contractual or discretionary, note the conditions on payment, and for any sign-on bonus or training bond, work out what you would repay if you left at different points. Then write a short list of what you are actually promised.
List every bonus or incentive in your contract, mark each one contractual or discretionary, and note any clawback period.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).