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Ben Jones
Ben Jones, UK Lawyer
Category: Law
Satisfied Customers: 63329
Experience:  Qualified Solicitor
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According to my contract my annual bonus should be paid out

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JA: Hello. How can I help?
Customer: According to my contract my annual bonus should be paid out in July. They paid 50% of my bonus then, and claimed they would pay the rest once they finished year end closing. Now they have come back to say they would only pay 20% of my total bonus based on final net sales, however they never communicated the bonus targets or parameters in wiriting at the beggining of the year as is stipulated in the contract. They are requesting a repayment of the extra 30% they paid out.
JA: Have you discussed this with a manager or HR? Or with a lawyer?
Customer: I am discussing with my new line manager and CFO, my line manager at the time never communicated these targets to me. I achieved growth of 460% and do not want to repay this 30% as they never communicated these targets to me.
JA: What is your employment status? Are you an employee, freelancer, consultant or contractor? Do you belong to a union?
Customer: Emplpyee
JA: Anything else you want the Lawyer to know before I connect you?
Customer: I have since been made redundant (after the bonus case came to light) and they are proposing to deduct this from my final salary.

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

What reason have they provided for wanting to pay 20% and also, how long have you worked there for?

Customer: replied 4 months ago.
Hi Ben. Looking forward to your advice before I get back to my manager on the case.

Hi there. What reason have they provided for wanting to pay 20% and also, how long have you worked there for?

Customer: replied 4 months ago.
They clain the Net sales target was 9.5M for the year, In my files I have 8.2M as the target. We closed at 8.9M, which was a growth on the previous year of almost 500%. I also grew the GTN from 63% to 79%. My point is that they never gave me any communication of what my bonus targets & parameters were, which in my contract states should be given to me in writing. I have been with the company 2 years 4 months.

Thank you. I will get back to you with my answer as soon as I can, which will be at some point today. The system will notify you when this happens. Please do not reply in the meantime as this may unnecessarily delay my response. Many thanks.

Many thanks for your patience. Workplace bonuses can, in their nature, overlap in the way they become payable, which can create some difficulties. For example, they could be contractual with discretionary eligibility, contractual with guaranteed eligibility, discretionary with discretionary eligibility or discretionary with guaranteed eligibility. So in many ways it can a bit of a grey area but I will explain the main principles below:

1. Contractual bonuses

This is where the employee’s participation in a bonus scheme is guaranteed, although it would not automatically mean they are also eligible for receiving payment under it. It could be a guarantee of participation under their contract, a specific policy or even verbal promises but where their eligibility would depend on meeting performance criteria over a period of time.

If the eligibility to a bonus is based on performance criteria, this could be subjective, objective or both. Subjective criteria would be where an employer is required to form an opinion of an employee's performance. If they do so they must do it in good faith and be fair. Objective criteria would usually be determined by 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.

2. Non-contractual/Discretionary bonuses

These are where there is no automatic right to a bonus, but where payments may be made entirely at the employer's discretion and on their own terms. The key aim is to avoid placing the employer under any obligation to implement a bonus scheme or make any bonus payments. A scheme where the employer has total discretion on whether to pay a bonus or not could be difficult to challenge. However, less stringent schemes where the employer may only have partial discretion or still form an opinion on eligibility or base it on performance could potentially be challenged under the fairness arguments mentioned above.

It follows that even though a bonus clause may be described as being 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.

In your case, you can argue that you can go by the published criteria, rather than any changes they had made AFTER the event. It would otherwise be too easy for employers to retrospectively change the payment criteria and always manage to get out of paying.

Does this answer your query?

Customer: replied 4 months ago.
Thank you for the above. My real question is that they never communicated in writing what my bonus targets or parameters were for 18/19, and so now they want to reclaim part of that payment made in July, I am objecting based on this lack of outline from the beginning. How can they now claim that my bonus payment should only be 20% when they never gave me targets for the year? Can I refuse the repayment?
My contract is worded as such:
"Employee is eligible for a performance bonus of up to 30% of basic annual salary, subjet to meeting targets specified in writing in the applicable bonus plan which is to be updated annually, the current version of which will be issued to the Employee after commencement of employment. Payment of bonus is subject to the terms of the bonus plan in force from time to time. Bonus arrangements are reviewed annually and payment of bonus of any kind in one year shall not create any right to payments of a similar value, or any payment, in future years."

The less clear it was and the more arbitrary the conditions, the more difficult it would be for them to recover it. Whilst there is nothing stopping them from trying, such as deducting it from your pay, you will have your own protection and can argue that it amounts to an unlawful deduction of wages. Hence my statement that it is very difficult for them to retrospectively change the targets as that would give them a carte blanche to abuse bonus payments

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