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Tuesday, July 10, 2012

Is it better to get a bonus or a raise?

Your humble question:  Is it better to get a large bonus or a small raise in pay?

My humble answer:  It often amazes me when my coworkers get excited when we get a large bonus instead of a raise.  The other day over lunch we learned we were going to get a big bonus this year, and my coworkers were all excited.  Yet I had to reign in the party by saying, "You know, you'd be better off getting a raise than a bonus, don't you?"  My friend chanted, "Oh, I'd much rather get a bonus.  I like getting the check so I can go out and purchase something."

I explained to them that if you do the math you will see that you will get more money if you get a raise.  Surely you'll get it in small sums in each paycheck so you'll hardly notice, but at the end of the year the extra money you make will be way more than the lump sum.  Plus you will get paid based on the hours you work as opposed to paid based on your budgeted hours.  And Lord knows most of us work more than our budgeted hours.

Most people just see that large lump sum of money and they see that as a good thing. It certainly is a good thing, but it would be better to get a raise.  That way you get a raise this year, and you get a raise next year that's accumulative over last years raise. Overall, you will get way more money with a raise than with a lump sum check.

Yet since my friends don't see the money they earn with a raise, and they do see the large sum in the form of a direct check in their name, they tend to think they are making out like bandits.  Yet the truth to the matter is, that's exactly what your bosses want you to think.  They want you to be excited about the bonus.

I'm not.  I took economics 101.  I know when I'm getting ripped off.  You should too.

1 comment:

Sheila Langeslay said...

Once again you are correct Rick. This is the same rationale that people use about their income tax refund. I would rather pay all year and have the use of my money.