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Category: Employment Law
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Bonus underpaid by employers

Customer Question

Bonus underpaid by employers contract interpretation.

I feel my boss has under paid on my bonus scheme.

my contract states 20% of basic salary paid and reviewed against goals & targets every 6 months ( exact wording provided below).

my boss has paid 20% of 6 months basic salary which equates to 10% my annual salary.

I have questioned the working of the calculation, my boss has indicated 20% of 6 months salary what he has worked off from - this is not explicit from the wording as per below 'word for word from my contract'

Sales Commission
Bonus Scheme
A bonus payment equal to 20 percent of your basic salary shall be available and will paid upon successful attainment of sales targets and any other objectives which shall be agreed from time to time with your director. Performance against such targets will be assessed at six monthly intervals and paid with your salary in arrears.

I think I should receive 20% of my 12 months basic salary paid every six months.

not 20% of 6 months basic salary.

It worth noting I'm the sales manager and award sales commission / bonus payments to my team which are based on a percentage of 12 months basic salary and paid quarterly.

can you give me your opinion, how you interpret the wording from my contract and how you think I shouls approach this now..

thanks in advance

Submitted: 4 years ago.
Category: Employment Law
Expert:  vincent2013 replied 4 years ago.

Hi, thanks for your question. My name's XXXXX XXXXX I'm going to assist you with it.


Notwithstanding the unhelpful drafting, the problem with assessing this clause in isolation is that it only contains half of the information. The manner in which the clause will operate depends on the "targets" and "objectives" agreed with the director "from time to time". For instance (to use an oversimplified example), let's say that the target is simply "to reach £500K in sales". In that case, if it is apparant (at the 6 month performance assessment) that this has been achieved, a bonus of 20% of 12 months salary may, arguably, be payable at that point. New targets would then be agreed and set, as appropriate.


However, if the targets are monthly milestones, over a period longer than 6 months, such as £100K of sales per month over the next 12 months, I'm not entirely convinced that the second sentence of the clause means that the effective annual bonus for meeting such targets becomes 40% of salary. In my view (as in the prior example) the second sentence appears administrative in function and, in these circumstances, the word "interval" suggests a point in time when an interim payment of the total bonus liability becomes due (rather than an obligation to make payment of 20% of the full 12 months salary every 6 months if monthly targets are consistently met).


Having said this, these are just some thoughts for you to consider and only comprise my view. It is very difficult to come to any kind of conclusion on this specific clause, particularly without conducting a review of the full agreement, the past and current target arrangements and any other ancillary evidence as to how the bonus scheme operates and has operated in the past.


As for the way forward, any employee who feels that his full bonus has not been paid and who cannot resolve the situation with his employer, can make a claim in the Employment Tribunal for unlawful deduction from wages. Such claim must be made within 3 months of the date on which the wages were due.


I hope this answers your question. If so, I would be very grateful if you could rate it positively so that I can receive credit from the website. Our conversation will not close and you can still ask me anything to clarify the information above.

Expert:  Nicola-mod replied 4 years ago.

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