LinkedIn is overhauling its annual employee bonus structure, shifting to a system in which payouts will be determined entirely by individual performance from fiscal year 2027 (FY27), according to a report by Business Insider.
The Microsoft-owned professional networking platform currently calculates annual bonuses based equally on company and individual performance. Under the existing formula, each accounts for 50% of the payout. From FY27, the company performance component will be removed from the calculation, making individual performance the sole determinant of employees’ year-end bonuses.
“At Linkedin, we believe you should be recognized and rewarded for the impact you make,” an internal memo viewed by Business Insider stated. “That’s at the heart of our pay-for-performance philosophy, and our bonus plan is an important part of how we recognize and reward you for your contributions.”
A LinkedIn spokesperson said the change was intended to establish a closer link between employees’ contributions and their compensation.
“We’re updating our bonus plan to create a more direct connection between individual performance and bonus payouts,” the spokesperson said.
What changes for employees?
Under the revised policy, employees’ individual performance during the fiscal year will determine their annual bonus payouts. The change applies to employees covered by LinkedIn’s corporate bonus programme but excludes sales employees whose compensation is tied to sales quotas.
The company said bonus targets would remain unchanged. However, these targets are not guaranteed payouts, and employees could receive more or less depending on their performance.
“Higher performance may result in a higher payout, while lower performance may result in a lower payout,” the internal memo stated, adding that managers would continue to differentiate payouts based on individual performance.
The memo also said removing the company performance component would not affect the funding of the bonus plan. “How we perform as a company continues to be important,” it stated.
LinkedIn follows wider Big Tech performance push
The bonus overhaul comes as major technology companies place greater emphasis on individual contributions when determining employee compensation. Such changes can offer higher rewards to top performers while raising expectations for those who fall short.
LinkedIn’s parent company, Microsoft, has also overhauled its performance review system this year, making distinctions between employee performance significantly sharper, Business Insider reported.
The changes at LinkedIn follow a period of cost-cutting at the company. In May, LinkedIn laid off employees and announced plans to scale back spending on marketing campaigns, vendors, customer events and under-used office space.
LinkedIn CEO Daniel Shapero told employees at the time that the company needed to operate more profitably while redirecting investments towards priorities such as infrastructure.