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Ben Jones
Ben Jones, UK Lawyer
Category: Law
Satisfied Customers: 47377
Experience:  Qualified Solicitor - Please start your question with 'For Ben Jones'
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I work small limited company business consultancy (6

Customer Question

I work for a small limited company business consultancy (6 permanent employees). I am a director but don't hold any shares. My MD (100% shareholder) wants to retire very quickly. He had offered an opportunity for employees to buy him out during the last month giving us only 2 weeks to get advice and come up with an offer. Needless to say, we were unable to come to an agreed price and a plan for how we would finance and run the company within that time. He is now going to make us all redundant with a plan to wind up the company. My question relates to the status of our annual bonuses, which for some individuals forms a significant proportion of remuneration. For the last 2 years the bonus has been paid in August salary (our financial year end) and is based on a percentage of operating profit. I have my redundancy meeting with him this afternoon and have asked about the status of the bonus, given that we are effectively at the end of the 3rd quarter. He has stated that no pro rata bonus will be payable with redundancy package as there 'will be no profit', but has given no figures or further explanation so far, even though I have requested this. I am both an employee and director, so I understand I should be getting a more detailed answer - financially and legally.
Submitted: 1 year ago.
Category: Law
Expert:  Ben Jones replied 1 year ago.
Hello, my name is***** am a qualified lawyer and it is my pleasure to assist you with your question today.
Expert:  Ben Jones replied 1 year ago.
Please can you tell me how long you have been employed there?
Customer: replied 1 year ago.
7 years 3 months
Expert:  Ben Jones replied 1 year ago.
OK, thank you for your response. I will review the relevant information and laws and will get back to you as soon as I can. Please do not respond to this message as it will just push your question to the back of the queue and you may experience unnecessary delays. Thank you
Expert:  Ben Jones replied 1 year ago.
Many thanks for your patience. The fact that you are a non-executive director does not change your position in any way. As such you are still an employee and your rights are dictated by your contract. If you have a bonus clause which entitles you to a percentage of the annual profits and this bonus is due for payment in August, you would still need to show that the criteria for payment has been met for you to be able to lay any claim on this payment. It is therefore entirely possible that if you do not remain employed at the time the bonus is due or that the company no longer has any operating profit on which to base the bonus calculation, it could easily not be payable as a result. There is no law which states that a bonus must be paid pro rata if the employment is terminated part way through the bonus year. As bonuses are contractual benefits, their eligibility and the way their payment is determined will come down entirely on the wording of the contract. So if the contract does not say anything about a pro rata payment on early termination then no such payment will be due. If you do not believe that there is no operating profit and that there must be something in the pot, then you can ask for such information and whilst they may try and deny you that, you will be able to see it in the closing accounts of the company if necessary. So the only way you could try and get some bonus payment is if you can show that there was some operating profit in the end on which you can base a pro rata entitlement to the bonus. This is your basic legal position. I have more detailed advice for you in terms of the options you have if you find out that there was operating profit but no bonus was paid to you, 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 I no extra cost and leaving a rating will not close the question and we can continue this discussion. Thank you
Expert:  Ben Jones replied 1 year ago.
Hello, I see you have read my response to your query. Please let me know if this has answered your original question and if you need me to discuss the next steps in more detail? In the meantime please take a second to leave a positive rating by selecting 3, 4 or 5 starts from the top of the page. The question will not close and I can continue with my advice as discussed. Thank you
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Customer: replied 1 year ago.
Thanks for response. In yesterday's interview I asked this question and received a verbal indication of the cost of redundancies and other remaining debts. My MD indicated that the full accounts would be viewable in August and that he would consider any profit based or discretionary bonus given the situation. If you think there is anything else you could add or that I should be doing please advise .
Expert:  Ben Jones replied 1 year ago.
Thank you. It appears that the employer is willing to consider making a bonus based on what the profits are at the time the business is closed down and when the bonus would usually become due. So the key is to ensure that you have sight of these accounts to be able to verify what the profit was and what you should be de in the circumstances. The issue then really becomes one of what you can do if there is profit but the bonus is still refused. If that happens then you are looking at a potential case for unlawful deduction of wages or breach of contract. 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-tribunals2. 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: ***** ***** 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.