relation between base salary and bonus

[retinamd]

I have a question and would be grateful to get your opinion-
If there is a productivity bonus involved - does it make a difference what one's base salary is.. for eg.. say i get a base of $ 1,30,000 versus somebody else who gets $ 2,50,000 but both have the same measures for productivity bonus say.. 30% once you hit 3 times your base.
I thought it should not matter but when i took a calculator and started doing the numbers it looked like the person with the lower base takes home less at the end of the year(with bonuses etc) as compared to the the person with the higher base for the same amount of collections
Does this sound right or am I not calculating correctly. Thank you for your time.

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[dr seuss]

what

 

[Dusn]

I have a question and would be grateful to get your opinion-
If there is a productivity bonus involved - does it make a difference what one's base salary is.. for eg.. say i get a base of $ 1,30,000 versus somebody else who gets $ 2,50,000 but both have the same measures for productivity bonus say.. 30% once you hit 3 times your base.
I thought it should not matter but when i took a calculator and started doing the numbers it looked like the person with the lower base takes home less at the end of the year(with bonuses etc) as compared to the the person with the higher base for the same amount of collections
Does this sound right or am I not calculating correctly. Thank you for your time.

Yeah, you're right. You'll make less

 

[LightBox]

Assuming you can hit 3x base with either base salary, then your take-home pay will be slightly less with the lower base salary. See below for a simple calculation using Excel (assuming you collected 800k first year; bonus of 30% over 3*base).

The real question is whether or not it is realistic for you to reach 3x base. It sounds like this is your first job, so it may be unrealistic to reach 3x base during your first year. For example, let's say that you accept the 130k base salary job. Then you will need to bring in collections of 790k to achieve a total compensation of 250k. Collections of 790k is probably not realistic during your first year of practice. I would definitely take the 250k base salary.

Base salary 3*Base Bonus Total compensation
130000 390000 2283000 2413000
150000 450000 2265000 2415000
175000 525000 2242500 2417500
200000 600000 2220000 2420000
225000 675000 2197500 2422500
250000 750000 2175000 2425000
275000 825000 2152500 2427500
300000 900000 2130000 2430000
350000 1050000 2085000 2435000

 

[Bgladney]

Actually, with a $130K base and 30% over 3x the base, and with 800K in collections, you will receive $123K in bonus (30% of 410K excess collections) for a total of 253K.

With a $250 base and 30% over 3x the base, and with 800K in collections, you will receive $15K in bonus (30% of 50K excess collections) for a total of $265K.

Odds of someone collecting 800K in the first year is not good....just due to the fact that you will not have any collections coming into the practice for the first 90 days.

 

[LightBox]

Actually, with a $130K base and 30% over 3x the base, and with 800K in collections, you will receive $123K in bonus (30% of 410K excess collections) for a total of 253K.

With a $250 base and 30% over 3x the base, and with 800K in collections, you will receive $15K in bonus (30% of 50K excess collections) for a total of $265K.

Odds of someone collecting 800K in the first year is not good....just due to the fact that you will not have any collections coming into the practice for the first 90 days.

My bad. Forgot to take the difference in the Excel spreadsheet. Wrote that post kind of late. In any case, as BJB said, it is often difficult to reach 3x base anyways. during the first year.