Many employees are entitled to bonus payments which enhance their salaries under their contracts of employment or by verbal agreement or custom and practice. Employers introduce bonus schemes to retain employees, to create positive competitiveness in the workplace or to distribute salaries in a fairer way amongst their employees.
There are two types of bonus payments, guaranteed or discretionary bonus payments. Your contract of employment, staff handbook or policies and supplemental bonus documentation from your employer should confirm which type of bonus payment you are entitled to.
Guaranteed bonus payments
This type of bonus payment is unconditional, for example with no particular targets to reach, not dependable on your performance or the company’s performance and there is usually no discretion on your employer’s part. Provided that you are an employee the bonus payment is made and you have not, for example committed a gross misconduct during the course of your employment and have met the criteria for such a bonus payment then you are entitled to the guaranteed bonus payment.
Discretionary bonus payments
For most employers they implement a bonus scheme whereby the bonus payment for employees will be dependable on the company’s performance (profits or productivity) or your performance. Measurable targets need to be agreed with your employer (for example, sales targets). The employer has the discretion as to who, when and how much bonus should be paid to that employee. This will be set out in your contract of employment. There may even be a provision in your contract of employment or bonus documentation that in certain circumstances bonus payments will not be made to employees or that changes can be made to the bonus scheme from time to time. It is expected that your employer’s discretion is exercised fairly and reasonably. In deciding whether your employer has acted fairly, the court will considers factors such as your contract of employment and its terms on performance, the company’s performance, your performance, whether there has been different treatment amongst those who have performed similarly to you and industry custom and practice.
Your rights and claims:
Unlawful Deduction of Wages
As an employee, a claim for unlawful deduction of wages can be pursued at the Employment Tribunal if you are not paid your bonus payment by your employer or believe your employer has acted unreasonably. It is advisable to first of all speak to your employer to resolve the matter. Please note such a claim needs to be made within 3 months less 1 day from the date the bonus payment should have been made by your employer.
Breach of Contract
If you are no longer an employee, you may wish to pursue a breach of contract claim at the County Court for an unpaid bonus payment(s). With a County Court claim, unpaid bonus payments up to the last 6 years can be claimed for.
Your employer must not discriminate against you when using their discretion to pay bonus payments. For example, your employer cannot give a smaller bonus payment to a female employee compared to a male employee where their performance is similar or uses its discretion not to give an employee a bonus payment because of his disability/race/sexual orientation. You can bring a claim for discrimination under one of the protected characteristics at the Employment Tribunal, within 3 months less 1 day from the date the bonus payment was or should have been made.
Should you require legal assistance in relation to any of the above, please call our employment law team on 0151 735 1000. EAD’s employment department won the Employment Law Award at the Liverpool Law Society Legal Awards 2013. Our award winning legal team prides itself on providing a legal service which is second to none.
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Brodie Martin, Merseyside
Excellent, very professional, approachable when I needed advice. I would just like to say thank you to your staff.