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    • By RyRyB
      I got into a conversation awhile ago with some fellow game artists and the prospect of signing bonuses got brought up. Out of the group, I was the only one who had negotiated any sort of sign on bonus or payment above and beyond base compensation. My goal with this article and possibly others is to inform and motivate other artists to work on this aspect of their “portfolio” and start treating their career as a business. 
      What is a Sign-On Bonus?
      Quite simply, a sign-on bonus is a sum of money offered to a prospective candidate in order to get them to join. It is quite common in other industries but rarely seen in the games unless it is at the executive level. Unfortunately, conversations centered around artist employment usually stops at base compensation, quite literally leaving money on the table.
      Why Ask for a Sign-On Bonus?
      There are many reasons to ask for a sign-on bonus. In my experience, it has been to compensate for some delta between how much I need vs. how much the company is offering.
      For example, a company has offered a candidate a position paying $50k/year. However, research indicates that the candidate requires $60k/year in order to keep in line with their personal financial requirements and long-term goals. Instead of turning down the offer wholesale, they may ask for a $10k sign on bonus with actionable terms to partially bridge the gap.
      Whatever the reason may be, the ask needs to be reasonable. Would you like a $100k sign-on bonus? Of course! Should you ask for it? Probably not. A sign-on bonus is a tool to reduce risk, not a tool to help you buy a shiny new sports car.
      Aspects to Consider
      Before one goes and asks for a huge sum of money, there are some aspects of sign-on bonus negotiations the candidate needs to keep in mind.
      - The more experience you have, the more leverage you have to negotiate
      - You must have confidence in your role as an employee.
      - You must have done your research. This includes knowing your personal financial goals and how the prospective offer changes, influences or diminishes those goals.
      To the first point, the more experience one has, the better. If the candidate is a junior employee (roughly defined as less than 3 years of industry experience) or looking for their first job in the industry, it is highly unlikely that a company will entertain a conversation about sign-on bonuses. Getting into the industry is highly competitive and there is likely very little motivation for a company to pay a sign-on bonus for one candidate when there a dozens (or hundreds in some cases) of other candidates that will jump at the first offer.
      Additionally, the candidate must have confidence in succeeding at the desired role in the company. They have to know that they can handle the day to day responsibilities as well as any extra demands that may come up during production. The company needs to be convinced of their ability to be a team player and, as a result, is willing to put a little extra money down to hire them. In other words, the candidate needs to reduce the company’s risk in hiring them enough that an extra payment or two is negligible.
      And finally, they must know where they sit financially and where they want to be in the short-, mid-, and long-term. Having this information at hand is essential to the negotiation process.
      The Role Risk Plays in Employment
      The interviewing process is a tricky one for all parties involved and it revolves around the idea of risk. Is this candidate low-risk or high-risk? The risk level depends on a number of factors: portfolio quality, experience, soft skills, etc. Were you late for the interview? Your risk to the company just went up. Did you bring additional portfolio materials that were not online? Your risk just went down and you became more hireable.
      If a candidate has an offer in hand, then the company sees enough potential to get a return on their investment with as little risk as possible. At this point, the company is confident in their ability as an employee (ie. low risk) and they are willing to give them money in return for that ability.
      Asking for the Sign-On Bonus
      So what now? The candidate has gone through the interview process, the company has offered them a position and base compensation. Unfortunately, the offer falls below expectations. Here is where the knowledge and research of the position and personal financial goals comes in. The candidate has to know what their thresholds and limits are. If they ask for $60k/year and the company is offering $50k, how do you ask for the bonus? Once again, it comes down to risk.
      Here is the point to remember: risk is not one-sided. The candidate takes on risk by changing companies as well. The candidate has to leverage the sign-on bonus as a way to reduce risk for both parties.
      Here is the important part:
      A sign-on bonus reduces the company’s risk because they are not commiting to an increased salary and bonus payouts can be staggered and have terms attached to them. The sign-on bonus reduces the candidate’s risk because it bridges the gap between the offered compensation and their personal financial requirements.
      If the sign-on bonus is reasonable and the company has the finances (explained further down below), it is a win-win for both parties and hopefully the beginning a profitable business relationship.
      A Bit about Finances
      First off, I am not a business accountant nor have I managed finances for a business. I am sure that it is much more complicated than my example below and there are a lot of considerations to take into account. In my experience, however, I do know that base compensation (ie. salary) will generally fall into a different line item category on the financial books than a bonus payout. When companies determine how many open spots they have, it is usually done by department with inter-departmental salary caps.
      For a simplified example, an environment department’s total salary cap is $500k/year. They have 9 artists being paid $50k/year, leaving $50k/year remaining for the 10th member of the team. Remember the example I gave earlier asking for $60k/year? The company cannot offer that salary because it breaks the departmental cap. However, since bonuses typically do not affect departmental caps, the company can pull from a different pool of money without increasing their risk by committing to a higher salary.
      Sweetening the Deal
      Coming right out of the gate and asking for an upfront payment might be too aggressive of a play (ie. high risk for the company). One way around this is to attach terms to the bonus. What does this mean? Take the situation above. A candidate has an offer for $50k/year but would like a bit more. If through the course of discussing compensation they get the sense that $10k is too high, they can offer to break up the payments based on terms. For example, a counterpoint to the initial base compensation offer could look like this:
      - $50k/year salary
      - $5k bonus payout #1 after 30 days of successful employment
      - $5k bonus payout #2 after 365 days (or any length of time) of successful employment
      In this example, the candidate is guaranteed $55k/year salary for 2 years. If they factor in a standard 3% cost of living raise, the first 3 years of employment looks like this:
      - Year 0-1 = $55,000 ($50,000 + $5,000 payout #1)
      - Year 1-2 = $56,500 (($50,000 x 1.03%) + $5,000 payout #2)
      - Year 2-3 = $53,045 ($51,500 x 1.03%)
      Now it might not be the $60k/year they had in mind but it is a great compromise to keep both parties comfortable.
      If the Company Says Yes
      Great news! The company said yes! What now? Personally, I always request at least a full 24 hours to crunch the final numbers. In the past, I’ve requested up to a week for full consideration. Even if you know you will say yes, doing due diligence with your finances one last time is always a good practice. Plug the numbers into a spreadsheet, look at your bills and expenses again, and review the whole offer (base compensation, bonus, time off/sick leave, medical/dental/vision, etc.). Discuss the offer with your significant other as well. You will see the offer in a different light when you wake up, so make sure you are not rushing into a situation you will regret.
      If the Company Say No
      If the company says no, then you have a difficult decision to make. Request time to review the offer and crunch the numbers. If it is a lateral move (same position, different company) then you have to ask if the switch is worth it. Only due diligence will offer that insight and you have to give yourself enough time to let those insights arrive. You might find yourself accepting the new position due to other non-financial reasons (which could be a whole separate article!).
      Conclusion/Final Thoughts 
      When it comes to negotiating during the interview process, it is very easy to take what you can get and run. You might fear that in asking for more, you will be disqualifying yourself from the position. Keep in mind that the offer has already been extended to you and a company will not rescind their offer simply because you came back with a counterpoint. Negotiations are expected at this stage and by putting forth a creative compromise, your first impression is that of someone who conducts themselves in a professional manner.
      Also keep in mind that negotiations do not always go well. There are countless factors that influence whether or not someone gets a sign-on bonus. Sometimes it all comes down to being there at the right time at the right place. Just make sure you do your due diligence and be ready when the opportunity presents itself.
      Hope this helps!
    • By Rafael Smeers
      Nice to meet you!
      First of all, it is a pleasure to be around and thank you for the available help!
      Basically, I am working on a new project and I would like to share some concept arts on my Twitter. The point is I am quite confused as to what I need to do to protect the general game idea, assets, and my company logo from being stolen/used unproperly by other people.
      I will definitely make great use of such information!
       
    • By James Britton
      Video game industry is at its best with $108.9 billion in global revenue for 2017, representing a 8% growth compared to 2016. According to Newzoo, there are currently more than 2.2 billion active gamers across the globe.
      In spite of this massive growth in gaming industry, the video game retailer GameStop has been struggling over the past few years as video game purchases from retail stores continue to decline due to the strong growth in the e-commerce and competition from online giants like Amazon.
      The Grapvine, Texas-based company, which had a total of 7,535 stores at the end of its fiscal 2016, anticipated to open about 100 new stores as well as close about 130 Video Game Brands stores worldwide and 55 Technology Brands stores in fiscal 2017.
      The demand for Nintendo Switch drove GameStop's sales up 15% in the recent quarter. https://news.alphastreet.com/gamestop-q4-2017-earnings/


      View full story
    • By James Britton
      Video game industry is at its best with $108.9 billion in global revenue for 2017, representing a 8% growth compared to 2016. According to Newzoo, there are currently more than 2.2 billion active gamers across the globe.
      In spite of this massive growth in gaming industry, the video game retailer GameStop has been struggling over the past few years as video game purchases from retail stores continue to decline due to the strong growth in the e-commerce and competition from online giants like Amazon.
      The Grapvine, Texas-based company, which had a total of 7,535 stores at the end of its fiscal 2016, anticipated to open about 100 new stores as well as close about 130 Video Game Brands stores worldwide and 55 Technology Brands stores in fiscal 2017.
      The demand for Nintendo Switch drove GameStop's sales up 15% in the recent quarter. https://news.alphastreet.com/gamestop-q4-2017-earnings/

    • By Ann Chufarlicheva
      Hey. I'm new on this forum. I and my friends create our first game. I'm drawing graphics and doing animation for our game. Well, I want to ask how much the artist or animator earns in the gaming industry. I plan to move to the US later this year. I want to try work in the gaming industry. I am from Russia.
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(First) commercial indie game - is it that hard?

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I don't know what i should put into the title of this topic.

 

There is always one thing that i always wondered: How do people release their (first) indie game without falling into a potential spiral of cost and or (high) taxes?

 

Before i go further into details, let me explain my situation.

 

I'm a 24 year old student studying/living in Austria (not Australia  :P ) but my nationality is polish.

I'm just making finishing touches on my hobby game project which i planned to release commercially on steam (i already passed the Steam Greenlight process successfully.)

 

Now, in Austria i need to register as a Sole-Proprietorship in order to be able to distribute the game through steam. - no problem here. AFAIK taxes only need to be payed if you have a revenue of over 11.000 euros in a year. (very simplified.)

 

The bigger issue here is the cost of the (mandatory) Social insurance.

Now, you don't need to pay social insurance if you have a yearly income of max 5.000€ and a max turnover of 30.000€.

 

If you go above that restriction once in a year, you have to pay the yearly social insurance for (at least) the next 5 years (without exceptions). The cost of social insurance starts at 2.500€ (yearly) and can go even higher, depending on your income from the last 3 years. (Which is mind-bogling). As an example, if you have 6000€ income (already taxed) in a year, you will have to pay nearly 41% from your income for social insurance alone.

(You aren't even able to live from that in this country.)

 

And to be honest, this seems to be very restricting. Basically if i start selling a game on steam, my income from the sales can't go above 5.000€ (unless i start to create costs in order to write them off from my income. Which i might have to do in the end...)

 

Now, given that i never released anything commercially (means that i have no idea how much i can expect to make in the first year) and because i'm studying and doing this mostly in my spare time (means that i don't know how long it would take to release another game... the current project took nearly 4 years to make) i'm a bit paranoid. I don't see how running a company as a Sole-Proprietorship is/would be financially viable once i would hit the given yearly limit of 5000€ (income). (Because after that i would need to pay a minimum of 2500€ yearly for social insurance, even if i don't have any income at all.)

 

 

(Obviously games sell at release date in the first month (or months) the most which means that the revenue in the first year might be high and then fall off to nearly 0 in the following years (Austrian law is/was made for self-employed people and companys which have a steady income over the months.) )

 

 

 

What i'm interested in is (if you live in another country) how the law (in your given country) handles Sole-Proprietorships/Self-employment. Do you have (mandatory) insurance? How much can your income be without paying taxes (or insurance?) Are there any kind of other "hidden costs"  which you have to keep in mind?

 

 

After gathering the information (reading austrian law, calling the local Austrian Federal Economic Chamber, etc... ) i'm really scared with the attempt to register as a Sole-Proprietorship. (And thus even considering releasing that game for free.)

 

Because let's face it: I'm in no way able to have a steady and high enough income to pay the insurance. (Not as an hobby-indie dev who released only one game and sure as hell not with a game which no one has ever heard about.)

Of course, all that stuff wouldn't affect me if the game sales very poorly on steam (which very well might be the case. Who knows. I just want to make sure to not fall into a financial trap.)

And logically, as a student who wants to release a game (primarely as a hobby) and might not release another one for the next 2-4 years (if at all), i shouldn't care about social insurance at this point in time. (and pay for that yearly.)

 

How are other devs handling this? (Releasing games commercially as a hobby.)

 

Again, i might be overthinking all that stuff and i could be making assumptions which are completely off. I just wanted to ask here if someone can give some insight in how that stuff works in other countries. (It they also have those seemingly high/costly barriers.)

 

 

NOTE: I don't want any kind of legal advice for this specific problem (that's what local lawyers are for.) I'm just interested if your local law for self-employment is similar/comparable to what i explained above.

Edited by Lewa

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What i'm interested in is (if you live in another country) how the law (in your given country) handles Sole-Proprietorships/Self-employment. Do you have (mandatory) insurance? How much can your income be without paying taxes (or insurance?) Are there any kind of other "hidden costs"  which you have to keep in mind?

In Australia (not Austria :P ) a sole proprietorship doesn't affect your personal taxes much -- it's mostly the same as "regular" taxes when working a "normal" job. The first $18k is tax-free, and then you pay ~30% on all income (a bit more complex than that...).

The difference is that if a sole proprietor earns over $80k in a single year, then from that point they must collect 10% GST on all income (equivalent to EU's VAT). Before that you're exempt from GST/VAT.

 

We don't have unemployment insurance -- everyone can access unemployment benefits here as long as they're not earning enough money... However, I did find out the hard way that the government assesses the income of sole-proprietors differently... Instead of checking whether you're employed or not, they look at your tax forms from the previous year. If you declared income last year, they tell you that you're making money so you obviously don't need their help.  :angry:

Our unemployment agency is extremely nasty and is designed to make the process as uncertain, humiliating, hard to access and dehumanizing as possible, and designed to reject as many people as possible though, so I shouldn't have been surprised to find out that they'd find a loophole to disqualify entrepreneurs too.

 

Generally, IMHO sole proprietorships should not be used for selling a product like a game. They're fine for being a freelancer, but they give you no legal insulation from the actions of the business. But that's off topic, so... Besides the legal implications, it also gives you a lot less opportunities to get creative with your taxes!

 

A limited liability company (here we call them "proprietary limited") is the usual course of action. This company will pay company tax on it's profits (and VAT on revenue - though steam might collect that for you??), and then they can either hire you as an employee, or they can pay you as a freelancer/sole-proprietor. Usually, as long as the company doesn't actually make any profit, it won't have to pay any company tax -- you can achieve this by ensuring that it always spends the money on services from yourself or other companies that you own. In some countries it's also possible for the company to be owned by a "family trust", which can suck out all the would-be-profits tax free and store them for later...

 

You should really make an appointment to see an accountant for a "tax planning meeting" (code for "tax avoidance" :D ). It may even be best to create several companies, and have each of them own certain assets (such as IP rights) and have them pay licensing fees/etc between each other... If one company does cash-based accounting, and another does accrual based accounting, then this lets you temporarily push money that you've made right now into the next financial year, which can help keep you under certain limits when you expect to make most of your money in one small burst.

Depending on whether you need the money now (job vs hobby) there may even be a way to leave it in the company, pay the company tax on the profits (which is often quite low) and let it sit in a company-owned term deposit for some time. Later on, you may be able to pay it to yourself as a "divident"/etc... In that case though, you'd have to be careful of capital-gains taxes, if they exist in Austria -- an asset you own (the company) has increased in value, so some governments try to tax you for that increase in value even though you haven't made any money off it yet :o

The money you spend on an accountant now could save you many times more money in the long run :wink:

Edited by Hodgman

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You should really make an appointment to see an accountant for a "tax planning meeting" (code for "tax avoidance" ). It may even be best to create several companies, and have each of them own certain assets (such as IP rights) and have them pay licensing fees/etc between each other... If one company does cash-based accounting, and another does accrual based accounting, then this lets you temporarily push money that you've made right now into the next financial year, which can help keep you under certain limits when you expect to make most of your money in one small burst.

This is very well put.

 

I would also look at Corporations in your country. In the US, sometimes it is best to have the company make the money and you receive from the company less than self-employment would hit the tax mark.

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In Australia (not Austria ) a sole proprietorship doesn't affect your personal taxes much -- it's mostly the same as "regular" taxes when working a "normal" job. The first $18k is tax-free, and then you pay ~30% on all income (a bit more complex than that...). The difference is that if a sole proprietor earns over $80k in a single year, then from that point they must collect 10% GST on all income (equivalent to EU's VAT). Before that you're exempt from GST/VAT.

 

And there is no additional cost involved (up to the 18k limit) which might eat away your income? (Like the said social insurance or any other stuff like that which you "have" to pay yearly and/or is mandatory.)

 

A friend of mine who already sells a game on steam faced the problem that his income was going above the 5k limit. In order to avoid the mandatory insurance (which would cut his income in half and would generate costs over the next years) he had to generate cost in order to stay below that level. (he even stopped advertising/talking about the game on his blog/twitter/youtube and reduced the price of the game on steam...)

 

 

  Generally, IMHO sole proprietorships should not be used for selling a product like a game. They're fine for being a freelancer, but they give you no legal insulation from the actions of the business. But that's off topic, so... Besides the legal implications though, it also gives you a lot less opportunities to get creative with your taxes!   A limited liability company (here we call them "proprietary limited") is the usual course of action. This company will pay company tax on it's income (and VAT - though steam might collect that for you??), and then they can either hire you as an employee, or they can pay you as a freelancer/sole-proprietor. Usually, as long as the company doesn't make any profit, it won't have to pay any company tax -- you can achieve this by ensuring that it always spends the money on services from yourself or other companies that you own. In some countries it's also possible for the company to be owned by a "family trust", which can suck out all the would-be-profits tax free and store them for later...  

 

At first, i was also considering an LLC as an option. (Especially because of the legal insulation which you have mentioned.) But it turns out that it's even more costly/complicated to create said company here.

As an example, in Austria you need to have a at least a capital stock of 35k€ in order to start a GMBH (which is the austrian/german equivalent of an LLC.)

 

The other option would be to open an LLC in poland. The requirements in poland are far less restrictive (You can start an LLC with a capital stock of just 5000 Z?otych which is around 1200 euros.)

But you still have ongoing costs of running an LLC (in addition to paying the insurance in Poland, which is around 3000 euros in a year) and it's (as far as i know from reading on the internet) harder to manage compared to a sole proprietorship. (But i'll look into that further.)

 

 

 

You should really make an appointment to see an accountant for a "tax planning meeting" (code for "tax avoidance" ). It may even be best to create several companies, and have each of them own certain assets (such as IP rights) and have them pay licensing fees/etc between each other... If one company does cash-based accounting, and another does accrual based accounting, then this lets you temporarily push money that you've made right now into the next financial year, which can help keep you under certain limits when you expect to make most of your money in one small burst.

Well, i probably should. Although, i'm not sure if i'll be able to avoid the insurance costs. (It's mandatory for everyone, even if you have a job and doing indie-dev as a part-time job.) (Best part is that if you work full time and do part-time self employment, you pay insurance twice. Once as self-employment and a second time from the full-time job...)

 

I don't want to dive into gamedev full-time (still studying). Just wanting to tap my toe into the water to gain some experience and see how well indie dev would work out for me.

Edited by Lewa

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Well, not encouraging as I am not aware of details but are tax havens (where establishing a company is quite easy) an option?

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OoOOoo, never knew there's so much problems. I live in Ukraine, and there's no big deal with sole-proprietarship.

I get the feeling that Austria is (in general) very unfriendly for small businesses/sole-proprietors due to the mandatory insurance. (No one who only earns 5-6K in a year will be able to pay 2.5K or more for insurance and live from that effectively.)

It sounds somewhat funny that you can be executed by the local "self-employment/business" social insurance ... (which is seperate from the social insurance which normal employed people get.)

Oh well...

 

 

 

Well, not encouraging as I am not aware of details but are tax havens (where establishing a company is quite easy) an option?

 It may be a possibility, but i would like to avoid any kind of legal trouble by doing so. Not to mention the language barrier and the lack of knowledge about the specific laws.

 

Although a possibility which i'll look into is the LLC in poland. (I'm polish after all and i'm visiting my grandmother/family in poland anyway on every vacation.)

 

 

I informed myself a bit about the polish LLC last night. There is a yearly cost that you have to consider.

1) around 440 Z?otych to pay to the KRS (some form of yearly documentation of the LLC) per year (is around 110 euros)

2) monthly payment of around 300-500 Z?otych (around 75-125 euros, can be even higher) to pay for "bookkeeping services"

LLCs in poland have to do "full bookkeeping" (at least that's how it's called here. Sole-proprietors/Self-employers don't need to do that.). From what i've heard/read you can do it yourself (which would save you the monthly payment) but it's strongly recommended to pay an accountant/bookkeeper to do it for you. (As it seems to be rather complex?)

 

But i'll inform myself further on this and search an accountant. (Before i start to post more uninformed/false information. :P )

 

 

Still, i'm open for more input/insight as to how that stuff looks like/works in other countries. (To get an idea if such costs are the norm or if i happen to live in a country which is rather "business-unfriendly" for small companies)

Edited by Lewa

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Here in Turkey, it's rather easy to have a sole-pro prietor and costs are rather reasonable (accountant is mandatory but no one charges official fee for small company) and you're theoretically have to pay for insurance but not practically as long as you don't need state hospital service :)

 

But here is also "freelancer" people not issuing invoice but something "income receipt" and if they're over certain limit, they pay income tax. I think it would be safe to assume such regulation exists in some form at least in Poland.

 

But if you still need a company structure, I think your best bets would be Ireland (where such companies are common and people give such service afaik) , Tax Havens again ( there are also such packages ) and on my own Republic of Macedonia. Tax rate is relatively low (9%-11% afaik), probably reasonable accountant costs, not your concern but rather low wages (along with Bulgaria and Romania) . Downsides would be it's not an EU country and if you need Paypal they can only send not receive.

 

Other than forming your own company, is using another company an option? ( Like revenue is € 100 , profit is € 40 after all costs they get some cut and pay you rest (but you probably still need that "income receipt" thing I believe) )

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