Wednesday, 12 February 2020

Annual Salary review and bonus

I was notified yesterday of my annual pay rise (1%!) and bonus (11.24% of base salary). Any pay rise is better than none, and considering that CPI in Australia only rose by about 1.8% during 2019, the 1% 'pay rise' means that my annual salary has only declined by about 1% in real terms during the past year. However, as I've only been receiving 0% or 1% 'increases' in base salary for many years now (and the increase in AWOTE in the 2019 FY alone was 3.1%) I'm certainly seeing my salary slowly decline in real terms over time.

The only saving grace is that when the company I work for was taken over by a multinational company several years ago they migrated our current salaries unchanged, and then phased in their standard 10% bonus scheme over the following three years. Effectively that means I got a one-off pay rise (assuming the bonus is allocated in full each year - which depends on company profitability and personal performance rating) of 10%. So my total salary package (including bonus and SGL) has probably kept pace with inflation over the past decade.

But in the grand scheme of things the quanta of my annual pay rise isn't too important to me these days, as I'm am rapidly approaching retirement age anyhow. So, as long as I don't get retrenched before I'm ready to retire, and earn roughly my current salary, I'll be happy.

Also, an extra 1% pay rise (and even the 10% bonus) is relatively 'small beer' in comparison to changes in my net worth. Once your NW grows beyond 20x salary income, asset allocation and investment returns are of more importance than pay rises or annual salary bonuses. Of course that means that any major investment declines (such as occurred during the GFC) are extremely painful - you can see your NW decline by the equivalent of a year's salary in a single month!

Looking at it another way, my annual bonus was roughly the same as the cost of the ill-fated purchase of an S-type Jaguar last year, and is also about the same as it costs me each year to stay registered as a Financial Planner (the basic admin and software fees to remain an 'authorized representative' of an AFSL holder).

Subscribe to Enough Wealth. Copyright 2006-2020

No comments: