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Ben Jones
Ben Jones, UK Lawyer
Category: Employment Law
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My company gives a discretionary bonus. I was made redundant

Resolved Question:

My company gives a discretionary bonus.
I was made redundant and not given a reasonable bonus. Although discretionary, does the company need to treat me fairly as compared to my peers.Will an employment tribunal help with discretionary bonuses?
Submitted: 1 year ago.
Category: Employment Law
Expert:  Ben Jones replied 1 year ago.

Hello, my name is***** am a qualified lawyer and I will be assisting you with your question today.

Expert:  Ben Jones replied 1 year ago.

When were you made redundant and what was the bonus measured on, was it performance?

Customer: replied 1 year ago.
Made redundant 1.5 months ago. The bonus is based on how well the company did, how well my section did and how well the individual performed.During redundancy I was told my performance was good.However I was not able to fill out my performance review. I was made redundant and locked out of the HR system.The company says it pays industry standard bonuses. I am confident I only got 1/10th of what my colleagues that reminded received.
Expert:  Ben Jones replied 1 year ago.

Hi the sorry I was in court earlier and got called back in. 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.

This is your basic legal position. I have more detailed advice for you in terms of the options you have for taking this further, which I wish to discuss so please take a second to leave a positive rating for the service so far (by selecting 3, 4 or 5 stars) and I can continue with that and answer any further questions you may have. Don’t worry, there is no extra cost and leaving a rating will not close the question and we can continue this discussion. Thank you

Ben Jones and other Employment Law Specialists are ready to help you
Customer: replied 1 year ago.
Great thanks.. please tell me my options going forward
Expert:  Ben Jones replied 1 year ago.

Thank you. If you wanted to pursue this then it potentially amounts to an unlawful deduction from wages or a breach of contract, which is made illegal under the Employment Rights Act 1996.

In order to try and resolve this, the employer should be contacted in writing, advised that this is being treated as unlawful deduction of wages and ask them to pay back the money within 7 days. Advise them that if they fail to pay the money that is owed, legal proceedings could follow.

If the employer does not return the money as requested, the following options are available:

1. Employment Tribunal - the time limit to claim is only 3 months from the date the deductions were made. To make the claim, form ET1 needs to be completed and submitted - you can find it here: https://www.employmenttribunals.service.gov.uk/employment-tribunals

2. County Court – this is an alternative way to claim and the advantage is that the time limit is a much longer 6 years and is usually used if you are out of time to claim in the Tribunal. The claim can be made online by going to: www.moneyclaim.gov.uk.

Hopefully by warning the employer you are aware of your rights and are not going to hesitate taking further action they will be prompted to reconsider their position and work towards resolving this.