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Ben Jones
Ben Jones, UK Lawyer
Category: Law
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Experience:  Qualified Solicitor - Please start your question with 'For Ben Jones'
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I get paid an annual bonus based on the previous years performance,

Customer Question

I get paid an annual bonus based on the previous years performance, and paid on 28th Feb the following year. This year they want me to take the bonus quarterly over 2014.

I am worried they are about to be sold, and I want to be sure that if I get made redundant, the company is still liable to pay me the remaining bonus yet unpaid.

I also want to ensure I get confirmation that this won't happen in future years (should we not get sold)

What can I do?

Thanks
Submitted: 2 years ago.
Category: Law
Expert:  Ben Jones replied 2 years ago.

Ben Jones :

Hello, my name is Ben and it is my pleasure to assist you with your question today.

Ben Jones :

Is this a contractual bonus?

JACUSTOMER-s9gmms01- :

Yes, but it is in the contract as being a discretionary bonus payment

JACUSTOMER-s9gmms01- :

i have been there for 6 years and each year they have normally paid in full on the 28th Feb

JACUSTOMER-s9gmms01- :

this year they say as the company has not had a great year, they will pay it quarterly. I suspect it is also to ensure we stay

Ben Jones :

does the contract mention the specific payment date?

JACUSTOMER-s9gmms01- :

no

Ben Jones :

ok let me get my response ready please

Ben Jones :

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.

So even if the employer tries to change the payment period to quarterly, if you have met the eligibility criteria you should be paid that full bonus even if made redundant partway through the year. As to negotiating the specific wording and guarantees that is for you to request from the employer – you cannot force them to do this but you can tell them that you will be treating this as a change to your contract if it happens and would object to it.

Ben Jones :

Please let me know if this has answered your original question or if you need me to clarify anything else for you in relation to this? Thanks

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