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The clause that lets them change your bonus terms at any time

A bonus clause can leave the amount, terms and conditions to the employer, to change at any time. This guide reads one from a real offer letter filed with the SEC. State law may protect a bonus once it is earned.

What it costs

Up to $30,600 of bonus a year rests on terms the clause lets the company change at any time.

Assumes the $170,000 starting salary in section 3 and the 18% target in section 4. An illustration, built on the assumptions stated here.

The clause, from a real filing

4. Bonus

… The amount, terms and conditions of such bonus are to be determined at the sole discretion of the Board of Directors of [the Company] (the "Board"), and such terms may be changed and conditions may be changed at any time with or without notice to you. Your target annual Bonus shall be up to 18% of your annual salary. … Payment of the Bonus shall be contingent upon you being employed by [the Company] as of the last day of the fiscal year in which it was earned.
Offer of Employment, Exhibit 10.28, CIK 1733294, Form 10-K, filed with the SEC on March 13, 2025. Names replaced. Read the original on SEC.gov
  • High risk

    A bonus clause that lets the company change it at any time

    The terms may change at any time, with or without notice. The letter calls the target "up to" 18%, calls the actual percentage discretionary, and makes payment depend on still being employed on the last day of the fiscal year.

The change to ask for

Before: The amount, terms and conditions of such bonus are to be determined at the sole discretion of the Board of Directors of [the Company] (the "Board"), and such terms may be changed and conditions may be changed at any time with or without notice to you.

After: The amount, terms and conditions of such bonus are to be determined at the sole discretion of the Board of Directors of [the Company] (the "Board"), and such terms may be changed only for a future fiscal year, on thirty (30) days’ written notice to you, and a Bonus is earned once the written performance targets for its fiscal year are met.

Suggested language to discuss, not legal advice. Thirty days is an example. State law may already limit changes to a bonus that has been earned.

Before you sign: the bonus terms

  1. Find the bonus clause. It may sit under Bonus, Incentive Compensation, or Compensation.
  2. Check who decides the amount, and whether the word "discretion" or "sole discretion" appears.
  3. Check whether the terms can change at any time, and whether you get notice first.
  4. Check when the bonus is earned: when the targets are met, or only when it is paid. Once earned, state wage law may protect it.
  5. Check whether you must still be employed on the last day of the year or on the payment date.
  6. Ask for written notice in advance, and for a bonus earned once its targets are met.
Open the one-page checklist to print
Transcript
  1. 0:00If a clause lets them change your bonus at any time, do not count on it.
  2. 0:06The clause lets the board set it at its sole discretion and change it at any time, with or without notice.
  3. 0:12This letter pays it only if you are still there on the last day of the fiscal year.
  4. 0:17In this offer, a target of up to $30,600, on terms that can change.
  5. 0:22Ask for notice in advance, and a bonus earned once targets are met.
  6. 0:27Check your contract for this clause.

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BeforeJD is not a law firm. This is informational only, not legal advice.