Bonus payment disputes: arguing rights and discretion
Bonus payments are a welcome boost for many employees, but sometimes, employers take away bonuses for their own unexplained reasons. Despite what many think, you do have some rights when it comes to bonuses, and the Foys employment law team are here to explain some of them.
The two types of bonuses an employee can receive
The first thing to understand is that there are two different types of bonus payments: contractual and discretionary. These are broad definitions, and bonuses can often be a mix of the two.
Contractual – Your contract will define these bonuses. Certain criteria are laid out for the bonus to be paid, such as meeting performance targets, and once those targets are met the employer is contractually obligated to pay the bonus.
Discretionary – These bonuses are controlled by your employer, who will decide when and why it will be paid out, as well as the amount that is to be paid.
Because contractual bonuses are laid out in writing, there are very few disputes concerning them, with any cases simply referring to the written promise and often ending there. However, discretionary bonuses can cause far more problems, because they are ultimately down to the will of the employer. That does not mean to say that they have full control as some court cases have proven.
The laws governing discretionary bonuses
Firstly, even though discretionary bonuses are strictly oral and usually not written down, they are fully binding once declared. In the case of Farrell Matthews & Weir versus Hansen, Ms Hansen left her job shortly after her bonus was declared, and the company refused to pay as a result. The court found this to be an unlawful deduction from wages, and she received her bonus.
Discretion must also be exercised rationally – an employer cannot legally remove a bonus if it can be proven that the employee would have earned it. In the case of Clark versus Nomura International plc, Mr Clark wasn’t granted his performance-based bonus because he was dismissed for misconduct, despite having earned the company almost £6 million in profit. This was found to be an irrational and perverse exercise of contractual discretion.
Bonus disputes can also come about as a result of discrimination. If your employer is withholding payment due to your race, gender or other physical factors, then you are entitled to fight them for it. In the case of Land Registry versus Houghton and others, Ms Houghton and four of her colleagues didn’t receive bonuses due to excessive absence, which was a result of their individual disabilities. This was found to be discriminatory and unjustified, even though the bonus was discretionary in the first place.
It must be noted that while these cases set precedence, the law surrounding discretionary bonuses remains in a grey area. Many of these decisions came after lengthy court battles.
Are you missing your bonus?
If you’ve had your bonus removed unfairly, then you may be eligible for a claim to get it back. Get in touch with the team at Foys Solicitors – we have experience in all aspects of employment law, and we can advise you on whether you have a case or not. And even if you think you don’t, there’s no harm in checking with our free initial consultation.
To find out more about whether you have a case fill out our Online Form, or get in touch with our employment law solicitors at your local office.