Please interpret contract math

[Cross Hair]

What is the name of your state (Ohio)?

My new(as of April, 2011) employment agreement has a performance bonus clause the reads;

"Employee shall be entitled to receive a quarterly performance bonus based upon sales growth calculated as follows: Twenty five percent (25%) of one-half percent (1/2%) of base salary, including COLA additions, for each one percent (1%) of previous years sales growth. Incentive compensation is paid quarterly based on full year cumulative results.

Please see if I'm doing this correctly;

Base salary = $109,200
1/2% of base = $5460
25% of that = $1365
So by my math I should receive $1365 for each percent of growth.

We showed 55.19% growth this last quarter and now the owner is back peddling. He is claiming the intent of the wording in regards to the part that says "25% of 1/2% of base salary" means salary earned for the quarter, not based on a full years salary. He also said that's "standard boiler plate contract lingo"

So by his math I only earn $341.25 for each percent of growth.

So who's right?

And no I wont quit over this or sue but it sure did let the wind out of my sails!

 

[LillianX]

It certainly sounds to me like you're correct. Is this a signed contract between you and your employer?

 

[Zigner]

What is your pay frequency?

 

[LdiJ]

It certainly sounds to me like you're correct. Is this a signed contract between you and your employer?

I actually think that the employer is right. Its not logical otherwise.

Think about it?

 

[LillianX]

I actually think that the employer is right. Its not logical otherwise.

Think about it?

I agree that it isn't logical, but if what he presented is the actual wording of the contract, the employer very well may have made a pretty big screw up when it was drawn up. On one hand, it's a pretty enormous amount of money. On the other hand, suing over it would probably eventually result in the OP losing a well paying job.

 

[Cross Hair]

This is a signed contract and I copied the wording exactly, I have 26 pays per year.

I don't think he ever anticipated a growth of 55% in one quarter, the largest previous quarter growth was 28% back in 2004.

I have no intention of putting a financial strain on the business, and a 75k bonus would certainly do that, and if we need to re write the contract so be it, but I was really put off by the way he tried to keep telling me I was misunderstanding the wording, it seemed pretty straight foreword. I just wanted to make sure from a legal view I was interpreting the bonus formula correctly.

 

[OHRoadwarrior]

I think the terminology quarterly, prior to the formula, indicates all the numbers following can be inferred as quarterly. Where I find a discrepancy, is that the calculation also implies it will be based on annual change. If Q1, Q2 and Q3 were plus 10% and Q4 was a minus, resulting in a net loss for the cumulative year, money would be owed back, for overpayment.

 

[Cross Hair]

"Q4 was a minus, resulting in a net loss for the cumulative year, money would be owed back, for overpayment".

You are correct in the way that reads and I questioned that before I signed the contract and was told not to worry, I would never be required to pay money back.

 

[LdiJ]

"Q4 was a minus, resulting in a net loss for the cumulative year, money would be owed back, for overpayment".

You are correct in the way that reads and I questioned that before I signed the contract and was told not to worry, I would never be required to pay money back.

I interpreted it a little differently....This is how it read/sounds to me.

You have an annual bonus that is paid quarterly...calculated using the four preceeding quarters, each quarter. Therefore its illogical that the contract ever intended you to be paid the equivalent of an annual bonus, every quarter.

Its convoluted to be sure, and the language imperfect, but as someone else already mentioned, to fight your employer on this could cost you your job.