Everything You Need to Know About Bonus Claw Backs

Employees and employers don’t always see eye to eye about issues, especially over salaries and payments. This dynamic becomes more sharply contested after an employee is let go. Once an employee is officially severed from the company, on the way out, they may claim they’re still entitled to a bonus they haven’t yet received.

Current employees and executives may receive supersized bonuses under false pretexts, which need to be curbed back. Haggling over the terms can be thorny. It isn’t always clear right away who deserves what, and employees may seize and take advantage of this ambiguity. Sorting the finances out between colleagues or former colleagues can be tricky because there are sensitivities whenever people who have worked together closely have disputes.

Having professionals help you recover employee expenses you don’t legally need to pay is an essential way to stop money from pouring out of your accounts. Please read on to learn more about bonus claw backs and how Summit A•R can help.

Recent Changes in Claw Back Regulations

The March 2023 collapse of the Silicon Valley Bank (SVB) has put the issue of clawbacks in the headlines as a bipartisan group of senators introduced regulations to claw back executive compensation in cases where bank officials made millions and received bonuses in the days and months leading to SVB’s and Signature Bank’s collapse.

The bill requires federal regulators to claw back part, or all, of the compensation bank executives receive in the five years leading up to a bank’s failure. This is an extreme example, as the bipartisan collaboration between Republicans and Democrats reflects that the public is not only acutely aware of this high-profile case but unified in their beliefs.

Typically, claw back policies are tied to compensation paid under incentive-based plans. If the company reaches a certain target, executives receive proportionate bonuses that are set and agreed to by the board. In cases like the above, where a major bank folds, it’s easy to see that executives failed to meet basic financial goals or targets. It’s seldom this open and shut a case.

In October 2022, the Securities and Exchange Commission voted to adopt new rules requiring companies to claw back executive compensation in cases where companies have to publicly restate their financials. Basically, when a company misstates financial numbers, and compensation is given according to this inaccurate data, the bonus received under false pretenses gets clawed back.

It doesn’t matter whether the misstatement was accidental or on purpose. Congress initially mandated this law in response to the 2007-09 financial crisis, but it was left unfinished until 2015 when it was revived to contend with corporate malfeasance. The idea is to incentivize accurate financial statements in the first place and create a way to crack down on wrongdoing.

Current and former employee violations can cause major ongoing problems that need to be resolved quickly and properly.

Who You Need in Your Corner

Having a reputable collection agency with years of experience and a track record of recouping about double the industry standard is invaluable when initiating a claw back. Summit A•R’s commercial debt collection efforts exceed industry standards, which we proudly achieve without using aggressive or unfriendly tactics.

Our interactions are always professional and sensitive, and we get our clients more money in less time than it would otherwise take. Outsourcing accounts receivable reduces the burden on core employees best left to other tasks. Summit A•R’s trained, licensed specialists have more experience and tools at their disposal than regular HR departments.

No matter what claw back issue you’re facing, we can help.

Stay Out of Court

The worst result possible for a business involves long, draining court cases which sap businesses of money and time. Once an employee is gone, they may feel they have more to gain by attacking the company and seeking the maximum compensation than merely walking away quietly.

There are various types of claw back issues, but one universal thing they all have in common is it’s better to sort the problem out outside of court. As soon as lawyers get involved, money drains away, and you’ll need more strategies to improve cash flow than usual.

You don’t want to get in a situation where an ex-employee leverages your desire to stay out of court to try to get more compensation than they are entitled to. Reacting to a major situation as it unfolds rather than being prepared can be costly.

Everyone hopes these situations don’t arise, but they could. Summit A•R has an A+ rating from the BBB and a proven debt collection strategy based on years of excellence in the field since 1996. We will keep you out of court and ensure your accounts are full. 

Our PHD Approach

Even when dealing with someone who doesn’t work at the company anymore, it’s essential to treat everyone with fundamental dignity. Sometimes, faceless debt collectors use aggressive, unfriendly tactics to strong-arm those in debt into making payments.

Not only does this lead to ugly and uncomfortable situations for all involved. Summit A•R has proven that our Preserve Human Dignity (PHD) approach yields better results, whether working with small companies to major corporations.

People can be understandably prickly when it comes to paying or receiving money. Ideally, everyone abides by agreements they committed to, and no issues arise. But when they inevitably do, it helps to have calm, experienced professionals resolve things smoothly before the problems grow any larger.

Don’t rely on impersonal debt collectors using ugly tactics that don’t even get optimal results.

It’s easy to know that performance targets weren’t reached when a major bank collapses, but most situations aren’t this cut and dried. Don’t get stuck in the intractable sludge of the courtroom. Should the need for a claw back arise, keep your business operating smoothly by hiring Summit A•R to promptly and effectively resolve the situation.