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.

A bonus payment is a form of compensation that is over and beyond the amount specified as base salary. Some companies may include bonuses as part of their work package or contract, and some may offer them on a random basis to those they may wish to thank or reward for good work.

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. An employer must make this payment if the employee meets certain criteria laid out in the contract. For example, if an employer lays out clear performance targets and you meet them, you will be entitled to your bonus.
  • Discretionary – These bonuses are controlled by your employer. They decide who will be paid and when and why it will be paid out, as well as the amount that is to be paid.

Generally, there are very few disputes concerning contractual bonuses; this is because they are laid out in writing and end with the written promise.

However, discretionary bonuses can cause far more problems. This is because they are ultimately down to the will of the employer, and not backed up by any form of written agreement. However, that does not mean to say that they have full control, as some court cases have proven.

The laws governing discretionary bonuses

For starters, discretionary bonuses though strictly oral and usually not written down, are fully binding once declared. Many points of contention between employer and employee occur when an employer unfairly exercises their discretion and reduces or terminates a bonus. There are a few key factors that come into play when deciding whether you have a case, if you feel that you have lost your bonus unfairly.

Discretion – Discretion must be exercised rationally – an employer cannot legally remove a bonus if it can be proven that the employee had 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.

Discrimination – 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.

Bonus clauses – 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.

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.

Retford – 01777 703 100
Worksop – 01909 500 511
Doncaster – 01302 327 136
Clowne – 01246 810 050
Rotherham – 01709 375 561
Sheffield (Waterthorpe) – 0114 251 1702
Sheffield (Chapeltown) – 0114 246 7609

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