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Ben, began employment on 4th March 2013
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, 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.
Similarly, if an employer has the right to change the bonus criteria, but the work and effort have already gone in to qualify eligibility under the current terms, then changing it at a late stage where the eligibility is removed would go against the above principles and it could again be challenged.
Hope this clarifies your position? If you could please let me know that would be great, thank you
Ben, my question is on the commission rather than the year end bonus.
I was asking as the term bonus appears in my contract but commission does not and they are awarded on seperate criteria. I do have an additional form from my employer stating my commission terms but it does not mention anything about changing the terms .
, yes I understand that but the payments will be treated in the same way, I was only referring to ‘bonus’ of communication. But the principles would be the same – the employer cannot expect you to work under certain eligibility criteria, you to meet them and then change the terms before payment is due.
Please let me know if this has answered your original question or if you need me to clarify anything else in relation to this? Thanks
, I see you have accessed and read my answer to your query. Please let me know if this has answered your original question or if you need me to clarify anything else in relation to this? I just need to know whether to close the question or not? Thanks
I was wondering if you can advise if there is a legal difference between bonus and commission. I ask because my contract does state that the bonus scheme can be changed "from time to time" however I have a seperate document with my commission scheme and it says nothing about changing the terms. Commission is not mentioned in my main contract.
commission is usually a percentage of sales, paid on a more regular basis, whereas bonuses are usually one off payments paid on the satisfaction of certain criteria, such as performance. But ultimately it would depend on the terms and how each payment is described, so if the definition of the bonus scheme can be interpreted to include the commission payments it can be included in it, but it would appear they are separate in this case
does this answer your last query?