Bonus Entitlement and Leavers
"One of my employees has handed in their resignation - they were due their bonus on the same day - do I still have to pay it?"
Our clients ask this question a lot and we expect future clients will continue to ask the same as the ambiguity of bonus entitlement, resignations and notice periods arises from a lack of clarity in their Bonus Policy, if one exists at all.
More often than not, bonus payments are described as 'discretionary' - but this is usually because the employer hasn't got around to formalising a bonus structure that's consistent, clear and available for all employees to read and understand.
Using the claim that bonus payments are 'discretionary' is weak at best, especially if bonuses have been paid consistently in the past and no formal agreement of payment and structure has ever been provided. Refusing to pay a discretionary bonus arbitrarily is unlawful.
We provide clients with formal, written bonus clauses that prevent any 'mis-understandings' when employees resign and make a claim for a bonus payment. When drafting these clauses we ensure:
The use of unambiguous, plain English;
Confirmation of the type of bonus that will be paid e.g. a guaranteed amount, discretionary, wholly or partly;
Confirmation of payment arrangements e.g. paid in one amount or in instalments;
Whether any target has to be met by the employee or the business before payment, and what this target is;
For a signing-on bonus, we include provision for repayment, possibly of part rather than the full amount, if the employee leaves before 12 months or a longer period;
To state any entitlement if at the time of payment the employee has given notice to end employment, or has left the business. On termination will the employee be entitled to a pro rata bonus payment, paid after their departure? Is this conditional on the employee abiding by their post termination restrictions?
To avoid bonus conditions which could be indirectly be discriminatory;
To confirm what happens to the bonus payment if the employee is on garden leave. Not paying it may result in post-termination restrictions becoming obsolete, which should be avoided.
For a thorough review of your existing bonus arrangements, policies and clauses, please contact us at firstname.lastname@example.org