Leaving a Job Before Your Annual Bonus? Here’s How To Negotiate

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I’ve written a lot on negotiating compensation in both The Career Toolkit, Essential Skills for Success That No One Taught You) and my negotiation blog posts. As we head towards the end of the year many people wonder about taking a new job when they have an upcoming bonus at their current one. We’ll look at how to analyze the options and then how to negotiate.

First, consider the size and timing of your current bonus. Even if you’re eligible for a large bonus, that doesn’t mean the company will give you one. It can vary based on the company, industry, and macroeconomic conditions. You may have some sense of what you’re likely to get based on prior bonus history or signaling from the company. You can always try to feel out your manager, asking how you’ve been doing or the expectation of the bonus size this year. Knowledge is power, knowing bonuses will be big or small can significantly impact this decision.

Next, consider the size of the bonus compared to your compensation at your current and future role. Let’s suppose you’re making $150,000 and are likely to get a 10% bonus. That’s up to $15,000. If it’s the day before the bonus is handed out, wait the extra day and get it. If it’s in six months, that’s a long waiting period. You’ve really only accumulated $7,500 of the bonus. Suppose that your next job is paying you $10,000 more a year in salary; in those six months you’ll make an extra $5,000 in income, so really you’re only losing $2,500 (which itself is less after taxes). When you consider future growth potential, and a better commute, culture, and/or manager, and the cash value of all those are aspects of the job, you may not be losing anything. Obviously, six months is extreme, but it illustrates the point of prorating the expected bonus of the current job against the prorated increase in income of the new job.

We’re also assuming that if you don’t take the new job today, and wait until after the bonus to leave, that an equivalent job will be available then. Depending on your level and the job market, that may or may not be true. If you have only a few years or experience and a relatively junior job in a strong market, that may be the case. If the job market is weakening, it may not be. Even in a good market where you can get the same salary, the company mission, culture, and role may not be as good at the next job opportunity you’d find. As you become more senior these other attributes become less fungible between jobs.

There’s also a question from the hiring company’s side. Asking the new company to wait a month instead of two weeks may not be a big deal (despite some hiring managers who always seem to want someone yesterday). They should be hiring for the next few years, not the next few weeks. They may even be growing rapidly and hiring multiple people into the role, so they need to hire another in a month or two anyway. Waiting a bit may not be an issue for them.

There's a risk in waiting, of course, because that future may not materialize. In the coming week they may hold off on additional hires originally planned. The company may also actually need someone ASAP. If there’s a project with a hard deadline in a few months and your skills are in the critical path, waiting even a few weeks could put the project in jeopardy, and so they may need a candidate sooner, even if another candidate is not as strong as you.

Given all the above you now have a sense of the time-cost trade-offs. It’s not binary. Most likely you wish to wait at your current job longer because there is additional compensation. The new company wants you sooner. There can be a trade-off of time and money. Most simply, the new company can offer a signing bonus for bringing you on sooner. (Typically, a signing bonus won’t be paid out for some number of months but since you’re talking about the job for the long term that shouldn’t matter much unless you need the bonus today.) The way to ask for such a bonus is to note the expected bonus and talk about the one-time cost to you, proposing a one-time mitigation of the signing bonus. (The company may reasonably ask to see your current contract or other evidence to verify it.)

On the other side, your current company may want you a little longer, especially if you’re in a critical role. Suppose instead of two weeks' notice, they asked you to stay for four or six weeks, or to continue to advise for a few weeks after leaving (this is more common for senior level people). Here you might be able to negotiate staying a little longer (assuming that can be worked out with the new company) in exchange for a pro-rated bonus, or a one-time exit bonus (less common other than for c-level people).

In reality you really have a three-party negotiation, or more practically, dual two-party negotiations. Standard principles apply in terms of trading off value on each side. Knowing how time-sensitive either of the companies is to your joining or leaving can provide leverage. As with any multiparty negotiation, sequencing can be key (this is an advanced topic most negotiation books don’t cover). Knowing the demand or flexibility of one of the two counterparties can change how you approach the other. Above all, remember that these are effectively a multi-round negotiation because you will have an ongoing relationship with them (at least the new company if not also the people at the old company). Approach the negotiation and apply appropriate messaging with that in mind.

While this may seem daunting the good news is that you have options. Any given day someone is trying to find a job offer whereas you have two. Most importantly, the marginal value of the lost bonus money is likely mitigated, or even overshadowed by the other non-monetary compensation and long-term opportunity. Unless it’s a very large amount, don’t lose sleep over it; there’s a reason you’re leaving and it’s likely bigger than the dollars in the bonus.