A discretionary bonus in your offer
A bonus clause tells you how much you might get, when, and on what conditions. The word 'discretionary' tells you who decides. Most of the meaning is in the conditions, not the percentage.
What it's for
A bonus lets the employer advertise a bigger number than the salary while keeping the extra part conditional. The conditions usually cover three things: whether the company did well, whether you did well, and whether you're still there on the day it's paid. Each one is a way the number can become zero.
How it shows up in an offer
"You will be eligible to participate in the Company's annual bonus plan with a target of 15% of base salary. Any bonus is discretionary, based on Company and individual performance, and pro-rated for your first year. To be eligible for a bonus, you must be actively employed and not have given or received notice on the payment date."
Fifteen percent is the target, not the amount. Whether you get it, and how much, is the company's call ("discretionary"), based on results it will judge. Your first year is pro-rated, so a September start earns a fraction. And you only receive it if you're still employed — and haven't resigned or been given notice — on the day it's paid, which can be months after the year it rewards. Resign in February and the previous year's bonus, paid in March, is gone.
What to check in yours
- Target versus guaranteed. "Eligible for a target of 15%" and "a bonus of 15%" are different sentences. Occasionally a first-year bonus is guaranteed in writing; if yours is, that's a real promise. If it's a target, it's a ceiling with conditions.
- "Discretionary." The word means the employer decides. Even a formula-based plan can be labelled discretionary; when it is, the formula is guidance, not a right.
- The payment date and the employment condition. Find when the bonus is paid, and find the sentence that says you must be employed then. Together they tell you the earliest date you could resign without forfeiting the bonus.
- "Given or received notice." A stricter version: not only must you be employed, you can't have handed in your notice. This pushes the safe resignation date past the payment date.
- Pro-rating. First year, and sometimes the year you leave. If it's pro-rated on the way in, check whether it's pro-rated on the way out or simply forfeited.
- Where the plan lives. "Subject to the Company's bonus plan" points to a document you haven't seen. Ask for it. Plan documents often say more about forfeiture than the letter does.
- Whether bonus counts for other things. Pension or RRSP/401(k) matching, life insurance, severance calculations — some are based on salary only, some on salary plus target bonus. Occasionally the letter says.
Where a lawyer comes in
Whether an employment-on-payment-date condition applies in your circumstances — particularly if the company ends the job just before the bonus is paid — is a legal question in every jurisdiction and one we don't answer. The report tells you what the clause conditions the bonus on and what the earliest safe dates are, so you can plan; if a bonus is a large share of your pay, the forfeiture language is worth an employment lawyer's opinion before you sign, not after.
This page explains what a clause says and what to look for in your own offer. It doesn't tell you what the law is where you work or whether a clause would be enforced — that's a question for an employment lawyer, and the page says so where it applies. Informational, not legal advice.