Who gets a bigger bonus: a losing Super Bowl team or a Wall Street employee?

That amount can make even some wealthy financial professionals feel quite cold about their year-end performance bonuses. The average bonus on Wall Street in 2022 was $176,700, according to the New York State Comptroller’s Office’s annual report.

Each 49er will receive $45,500 as a first-round bye. $50,500 for winning a divisional playoff round; $73,000 for winning a conference championship; $89,000 for being on the team that lost in the Super Bowl. (For context, 49ers quarterback Brock Purdy signed a four-year, $3.7 million contract with an average annual salary of just over $930,000, according to Spotrac).

Meanwhile, bonus pay per Kansas City Chiefs player is scheduled to be $338,000. The wildcard winner’s prize is $50,500. $50,500 for split rounds; Conference Championship $73,000; The winning Super Bowl team earns $164,000. According to the contract, all players on the team’s active roster, inactive list or injured reserve will be paid in full.

In the world of professional sports, six figures are small potatoes. Super Bowl MVP Patrick Mahomes is working on a 10-year contract worth $450 million, according to Spotrac.

“This is not an insignificant change for him,” said Alan Johnson, managing director at Johnson Associates, a financial services compensation consulting firm.

It might be a dumb change, but at least it’s guaranteed. NFL players can expect bonuses stipulated in their contracts with the league, and Wall Street bonus amounts can be determined by the market.

According to the New York State Comptroller’s Office, the average Wall Street bonus in 2022, when inflation and rising interest rates have rocked markets, is $176,700, down 26% from the previous year’s average year-end payout of $240,400. The amount of value-added tax on bonuses in 2022 was $33.7 billion, down from $42.7 billion the previous year, the office said.

According to Johnson, the stock market will bounce back in 2023, but Wall Street bonuses aren’t likely to be as hot in the recently completed year.

Johnson’s 2023 bonus, which will be paid in 2024, is expected to remain flat or decrease, according to Johnson’s company. For those working in investment banking advisory work, for example, the value of cash bonuses and stock awards may decline by 15 to 25 percent year-over-year, the company says.

Johnson’s firm analyzes various bonus figures from financial experts more rigorously than the Office of the Comptroller General.
By his calculations, annual bonuses are typically between $300,000 and $500,000, Johnson said. He said seven-figure bonuses were “unusual” and given only to the top 5 to 10 percent of companies.

Wall Street bonuses aren’t just a fancy addition to your finances. It often accounts for a significant portion of Wall Street workers’ compensation. For junior employees receiving bonuses in the $300,000 to $500,000 range, the bonus could be 50% of salary. For Wall Street people earning seven-figure bonuses, this could amount to 60 to 80 percent of their salary, he said.

A six-figure bonus may not add much to the total compensation of a superstar like Mahomes, but rookie NFL players making the league minimum of $795,000 should see their salaries increase significantly due to postseason bonuses.

Johnson saw salary similarities between the football field and top executives. Each career can be short-lived due to intense competition and a lot of burnout.

A career in advanced financial services can typically end in the early 50s, he said. It is no exaggeration to say that football careers are much shorter.

“For the amount of money these people make, it has to be hard and competitive,” Johnson said. This applies to both finance and football, he points out.

What about taxes on bonuses?

The Internal Revenue Service is another team looking for money, and players must play by their rules.

Robert Raiola, group director for sports and entertainment within PKF O’Connor Davies Advisory, said bonuses in sports and other venues were fully taxable. His work includes handling tax matters for NFL players, including two players on the Kansas City Chiefs.

The IRS says this includes bonuses along with other types of “supplemental wages” other than the employee’s regular wages. Commissions, overtime pay, severance pay, and allowances for accrued sick leave are also included in supplemental wages, the agency said.

There are several ways employers can do this. For example, they could lump bonuses with regular wages and withhold taxes “as if the total was a single payment for a regular pay period,” the agency said.

But Raiola said a more common approach is to pay the bonus separately and withhold 22% in federal taxes on amounts under $1 million. There is a 37% withholding tax on amounts exceeding $1 million, he said. For NFL customers, the bonus is separate from the salary received over 36 weeks.

Bonus money is treated as ordinary income, Raiola noted. If the bonus amount is less than $1 million, but the beneficiary’s income puts him in the highest tax bracket with a marginal tax rate of 37%, he will have to pay more to the IRS when filing his taxes.

In games where speed is critical, Raiola noted that his NFL clients have already received playoff bonuses. Now they’re waiting for their Super Bowl bonus check.