Facebook offers performance bonuses to employees as part of its compensation package. Performance bonuses are additional payments made to reward and incentivize employees for meeting or exceeding individual, team, and company goals and objectives.
What are the eligibility requirements for Facebook’s performance bonus?
To be eligible for a performance bonus at Facebook, employees must:
- Be a regular full-time employee (not contract or part-time)
- Have completed at least 6 months of employment by the end of the bonus period
- Be in good standing (not on a performance improvement plan)
- Meet their individual goals and key results for the bonus period
Both corporate and technical employees at Facebook are eligible for performance bonuses based on their role and level. Employees in non-bonus eligible roles may receive spot bonuses at manager discretion.
How is the performance bonus amount calculated?
The performance bonus payout is calculated based on the following factors:
- Base salary – The bonus is paid out as a percentage of the employee’s base salary.
- Bonus target – Each level or grade at Facebook has a target bonus percentage (e.g. 10%, 20%).
- Company performance – The company bonus pool depends on how well Facebook met its financial goals.
- Team performance – Department heads allocate bonus budgets to teams based on results.
- Individual performance – Managers rate each employee’s performance and contributions.
Here is a breakdown of the process:
- Facebook sets a company bonus pool based on overall financial performance.
- The pool is allocated to departments/teams based on team goals and results.
- Within teams, managers rate individual employee performance.
- Ratings are combined with bonus targets to determine individual payout amounts.
- Bonuses are paid out as a percentage of employee salary.
What are the performance bonus targets at Facebook?
Bonus targets at Facebook differ based on job level and function. Here are typical bonus ranges:
| Level | Title | Bonus Target |
|---|---|---|
| E3 | Software Engineer | 10% |
| E4 | Senior Software Engineer | 15% |
| E5 | Staff Software Engineer | 20% |
| M1/M2 | Manager | 20-25% |
| M3 | Senior Manager | 25-30% |
| L6/L7 | Director | 40-50% |
| L8+ | VP | 50-100% |
Employees at higher levels or with outstanding performance may be eligible for bonuses above their target range. Bonus targets are prorated for new hires based on start date.
How does the individual performance rating work?
For the individual performance component, managers at Facebook rate employees on the following scale:
- 5 – Exceptional: Far exceeded expectations
- 4 – Strong: Exceeded expectations
- 3 – Fully met: Met all expectations
- 2 – Partial: Met some expectations
- 1 – Did not meet: Missed expectations
Employees must receive a 3 rating or higher to be eligible for any bonus payout. The scale translates to multiplier percentages:
| Rating | Multiplier |
|---|---|
| 5 – Exceptional | 120-150% |
| 4 – Strong | 100-120% |
| 3 – Fully Met | 80-100% |
| 2 – Partial | 0% |
| 1 – Did Not Meet | 0% |
Managers have discretion to assign multipliers within the ranges based on their assessment. The multiplier is applied to the employee’s target bonus to determine the final payout amount.
When are performance bonuses paid out?
Facebook pays out performance bonuses once per year on an annual bonus cycle. The timeline is typically as follows:
- January-June – Employees work towards individual, team, and company goals for the first half.
- July – Mid-year performance check-ins with managers.
- July-December – Employees work towards second half goals.
- December – Managers complete final performance ratings.
- February – Bonuses are announced and paid out for the prior year’s performance.
Bonuses are paid as supplemental income separate from employee salaries. Taxes and other deductions are withheld from bonus payments as required by law.
Who determines the performance bonus payouts?
While the performance review process involves input from employees, managers, and peers, ultimately bonus payout decisions are made by leadership at the executive level. The compensation team aggregates ratings, targets, and other data to model bonus pool scenarios for review by senior management.
The CEO and executives make the final call on total bonus pool amounts at the company and team levels. Individual bonus payments must be approved by senior managers before payout.
Can employees negotiate a performance bonus?
There is limited ability to negotiate a performance bonus payout at Facebook. The bonus process is designed to be an objective measure of employee contributions. Employees are encouraged to have open conversations with their managers regularly about performance and expectations. If an employee feels their bonus rating or payout is unfair, they can raise the issue through an internal appeals process.
How does vesting of stock bonuses work?
In addition to cash bonuses, Facebook may grant employees stock bonuses that vest over time. Stock bonuses are usually restricted stock units (RSUs). The vesting schedule for RSU bonuses depends on the grant size and conditions:
- New hire grants – Vest quarterly over 4 years.
- Refresher grants – Vest quarterly over 5 years.
- Promotion grants – Vest quarterly over 4-5 years.
- Performance grants – Vesting schedule varies.
The vesting schedule determines when the RSUs convert to actual Facebook shares that can be sold or transferred by the employee. RSUs have value even before vesting, as the share price fluctuates. Vesting generally accelerates fully in case of termination, disability, death or a change in control of the company.
How is the size of the bonus pool determined?
Facebook sets the total annual bonus pool based on its financial performance and other factors. Some key inputs include:
- Revenue vs. Target – Facebook’s revenue growth year-over-year.
- Profitability – Metrics like operating income, net income, EPS.
- User Engagement – Active users, time-spent metrics.
- Strategic Goals – Progress on key company initiatives.
The Compensation Committee of Facebook’s Board of Directors reviews performance and metric thresholds to determine the appropriate total bonus pool each year. The pool is a percentage of a financial metric like revenue or profit. The Committee and management then allocate the pool to organizations and teams.
In periods of exceptional company performance, Facebook will budget for larger bonus pools and higher payouts to employees. In years where goals are not met, the pool may be reduced or eliminated entirely.
What percentage of employees received bonuses?
Facebook has not publicly shared specifics on the percentage of employees receiving performance bonuses or average payout amounts. However, in general, most corporate employees who meet eligibility requirements and score a 3+ rating receive some level of bonus payment. Employees with higher ratings typically earn bigger payouts as a multiplier of their bonus target.
Among technology companies, Facebook is viewed as having competitive performance bonus plans, though not the highest in the industry. For example, one study by career site Paysa found Facebook’s average bonus in 2017 was $33,000, lower than companies like Google ($38,000) and Microsoft ($36,000).
How has the performance bonus changed over time?
Facebook has fine-tuned its performance bonus structure over the years, but the core objectives and mechanics have remained consistent. Some changes have included:
- Adjusting bonus targets and multipliers by level.
- Adding new metrics to tie bonus funding to user engagement.
- Increasing focus on collaboration across teams.
- Adding mechanisms to reward extraordinary contributions.
The formula has evolved from a more discretionary approach to bonuses early on to a structured system of targets and peer-reviewed ratings. This increased transparency and helped scale the process as headcount grew into the tens of thousands globally.
How does Facebook’s bonus compare to other tech companies?
Facebook offers competitive total compensation including base salary, stock grants, bonuses, and benefits. A few key comparisons on bonuses:
- Google – Slightly higher bonus percentages for most roles.
- Microsoft – Similar bonus targets to Facebook.
- Amazon – Lower bonuses than Facebook for engineers but significant for senior managers.
- Apple – Bonuses are more discretionary and tied to launches.
Among top technology firms, bonus plans vary but are generally part of rewarding employee performance. Facebook bonus targets are calibrated regularly based on compensation surveys of peer companies and roles.
What benefits do performance bonuses provide?
Performance bonuses help achieve the following benefits for Facebook and its employees:
- Drive Results – Incentivizes employees to meet individual, team and company goals.
- Reward Contributions – Connects rewards directly to results achieved.
- Retain Top Talent – Competitive pay keeps the best employees engaged.
- Reflect Company Success – Aligns employee payouts with Facebook’s performance.
- Provide Flexibility – Bonus pool size can adjust annually based on needs.
Themotivational aspects of bonuses encourage employees to go above and beyond. Tying bonus funding to company success also provides cost flexibility.
What are some common criticisms of performance bonuses?
Some downsides or criticisms to watch out for with performance bonus plans include:
- Complexity – Confusing or subjective performance metrics.
- Favoritism – Perception that payouts are not equitable.
- Short-Term Focus – Rewarding individual goals over collaboration.
- Eligibility Requirements – New hires or part-time employees may miss out.
- Unpredictability – Payout amounts can vary significantly year-over-year.
The most successful bonus programs find ways to minimize these downsides through transparent design, consistent application, and aligning company values and bonus incentives.
Conclusion
Facebook’s performance bonus provides substantial incentive for employees to perform at a high level individually and as teams. While competitive in the technology sector, the bonus targets and payouts remain flexible based on annual financial results and strategic priorities. This allows Facebook to respond to changing business conditions while continuing to reward top talent.
With bonuses now paid company-wide, Facebook faces challenges of scale in maintaining transparency, consistency, and goal alignment across a global workforce surpassing 75,000. However, its structured process of cascading company goals to teams and individuals helps maintain the effectiveness of bonuses in driving results.