Career Advice Tuesday – “Referral Bonus Etiquette”

July 6, 2010

Dear Infosecleaders:

I am not sure if this falls into the advice category, but I am hoping that you may provide me with some guidance.  Here is the situation:

I was recently recruited to a new position by a former manager.  He just landed an information security director role with a new company, and part of his position was to build a team.  We had worked together before, and it was a good professional experience.  I went through an abbreviated interview process, and was offered the position.   When the offer came, I was a little underwhelmed.  Considering that I was a known commodity, and I was hand-picked by my manager.

I called my manager to discuss my options and concern.  He told me that he would check and see what he could do.  In the end, he was not able to make any adjustments based upon their internal compensation scale.  I asked for salary, sign-on bonus, stock, vacation days – and every request was met by a dead end.   In the end, I decided to accept the position knowing that the job was good, and I had grown in the environment that my manager had created.  I was comfortable with my decision and I made peace with my disappointment surrounding the compensation.

When I began work, I sat through the HR presentation in orientation and I learned that the company had a policy to pay referral bonuses for incoming employees.  The bonus associated with employees at my compensation level was about 5K.  I was also told that managers are eligible for this bonus.

After learning this I was upset.  It was confusing to learn that my manager had profited from my hiring, especially when he knew that I was unhappy with my compensation.  Given the fact that he earned 5K for bringing me on board, I thought that at most, he could have asked HR to transfer this recruitment bonus to a sign-on bonus, or at least offer to split the amount in half (2.5K  each) considering that he would ultimately benefit from my work product.

Can you provide me with some advice.


Feeling Cheated

Dear Feeling Cheated:

I believe that your feelings are quite valid and I think that you have every right to be upset, considering that you sacrificed and your manager profited.

Although your feelings are correct, let me share some things about standard professional etiquette in these types of situations:

1) Managers should not received recruiting bonuses for building their teams.

By definition, team building is a component of being a manager.  This includes all aspects of team building – recruitment, training, development, retention, and succession planning.  Even if it is offered, for your manager to accept these monies is poor judgment on his behalf.  This type of decision does not reflect management level thinking or actions.

As it relates to your situation, I think that this lack of judgment is magnified.  Considering that you attempted to negotiate a better compensation package, your manager should have recognized that your hiring may have been in jeopardy.  A savvy manager would have worked with HR to secure an additional 5K in sign on money – even if it meant surrendering it from his own personal compensation.

2) The handling of referral bonuses.

My belief is that in any professional relationship that requires equal participation by two parties, that the consideration should be equal to both parties.  This particularly holds true in a scenario where a “Referral Bonus” is offered.   I think that if a referral bonus is offered by a company, and you reach out to a professional friend to “refer” them to the position, then you should be willing to split the financial reward with your professional friend.

One thing that people may consider when they do this the amount of the reward and the depth of their friendship with the other party.   For example, if the relationship is important to you, and the role does not work out, then it is possible that your friendship could be damaged and potentially destroyed.    If someone takes a position because of you, you may feel a certain amount of obligation and responsibility, if you profit from the event.  You have to determine if the risk is worth the reward.

If you are offered a referral bonus, you may want to have a conversation with the person that you are referring and set up some guidelines for the relationship.  This way, both parties can fully understand the boundaries of the relationship and be comfortable with their individual obligations and risk.

I believe that if your manager had had this conversation with you, you would not be experiencing the same feelings that you have right now.   If the relationship that you had with your manager is good enough to accept a job based on his suggestion, then  I think that you should confront him with how you feel, and see if he can provide you with some resolution.

Generally, referral bonuses are tied to a minimum duration of employment.  If you leave within 90 days, chances are he would have to return the referral bonus.  Since we have already determined that he is motivated by money, now all you have to do is negotiate the price.

Let us know how this works out for you.

MIke and Lee

Posted by lee | Filed Under Advice, Career Advice Tuesday, Compensation 


Comments are closed.