How can I negotiate a new bonus structure? Daniel Parker answers FT reader’s question

• 10 January 2025
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Daniel Parker, Senior Associate in our Employment and Partnerships team, shares his advice on how to negotiate a bonus structure and job title when offered a new role in banking.

Firstly, he highlights the importance of determining whether the bonus is contractual or discretionary. A contractual bonus is guaranteed if specified conditions are met, whereas a discretionary bonus allows an employer to decide if and how much to pay. A contractual bonus is usually preferable, as it provides more security.

For senior risk-takers, banks often have fixed and variable pay to create reasonable performance incentives. If a bonus is target-based, clarity should be sought on what those targets are. Are they based solely on performance, or do they also depend on the bank’s overall performance? Understanding this can help gauge the likelihood of receiving a bonus.

It can also be wise to negotiate a slightly lower performance target for your first year to account for the time spent settling into a new role or, ideally, a guaranteed first-year bonus. 

Be aware of any “clawback” provisions that allow an employer to reclaim bonuses in cases of gross misconduct or accounting misstatements. These are common in the banking sector and can significantly impact annual remuneration.

Regarding a job title, it’s common to negotiate this before starting a new role. It is worth understanding the team’s structure and progression pathway before making the request. Smaller teams may have limited titles, while larger businesses may offer more flexibility. If there’s a mismatch between your experience and title, this is ultimately worth addressing. 

Our Employment team often help Senior Executives considering a new role, with reviewing their proposed employment contracts and help to negotiate positive terms. Do get in touch to find out how we can assist. 

In the case of the latter, it may be prudent to obtain some assurance from your employer as to the likelihood of your bonus being paid bearing in mind recent business performance and forecasts for the future. However, if the bonus is based either wholly or partly on your own performance, it is important to ensure that those targets are realistic and achievable.

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