Hello, my name is XXXXX XXXXX it is my pleasure to assist you with your question today.
What does your contract say in relation to this bonus?
it does say it is discretionary
but it is paid every year regardless
and I have been told by my manager that the only reason it is reduced is because I have resigned
thank you Ben
When it comes to workplace bonuses, there are two main types: contractual or discretionary. There can be an overlap where a contractual term gives the employer discretion over payment, or there can also be further sub-categories, for example performance-related bonuses or bonuses payable subject to other conditions. What is certain is that the legal issue of bonus eligibility is a rather complex matter and would mainly be subject to interpretation of individual circumstances and the wording of the clauses in question.
A common example is a bonus clause which is contractual but which gives the employer the discretion to decide whether it would be payable or not. This is also a situation which would cause most disputes between employee and employer. Whilst at first glance this may give the employer full discretion as to whether the bonus should be paid or not, this will not always be the case.
If the eligibility to a bonus is based on performance criteria then first of all if an employer is required to form an opinion of an employee's performance they must do so in good faith and be fair. Any other performance criteria would usually be determined based on qualitative data. Assuming the performance conditions have been met, an employer will rarely be able to refuse payment of the bonus as doing so would be acting in bad faith and considered unfair. So this is an example where the employer's discretion is removed once the relevant eligibility conditions have been satisfied.
It follows that even though a bonus clause may be described as being entirely at the employer's discretion, there are circumstances, mainly in performance-based eligibility, where this discretion is removed and the bonus would automatically become payable if the eligibility criteria have been met.
thanks Ben, so the fact that the bonus is based on my performance and that performance has been rated to be say 70%, I am owed 70% of my discretionary 20% bonus?
you should not be penalised for resigning by having your bonus withheld, especially if there is no clause allowing that and the bonus is based on past performance, which you have already achieved. The calculation of what you are owed would depend on the usual way of dong this, looking at past experience so I can'r say that it would necessarily be 70% if your performance is 70% but the main point is that it should not just be reduced for you leaving
Many thanks Ben.