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Bonuses & Notice Period

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Hi

 

I wondered if I could please get some advice on my current employment situation:

 

I work at a company which has 5 staff members: 3 Directors, myself and my male colleague (we both undertake identical job roles).

 

Our company year runs 1st January to 31st December each year and bonuses are paid at Christmas time (around 21st) based on company performance over that year.

 

Bonuses are at the discretion of the Directors but have never not been paid in the past and there is no clause in my contract referring to bonus entitlement/the circumstances in which it can be withdrawn

 

On 1st December 2012 I commenced my one month’s notice period which ends on 31st December 2012 – meaning I will have worked the full year and will be employed on the date bonuses are issued.

 

One Director is happy to pay my usual bonus as we have hit the required targets over the period – but the other two Directors (husband and wife) want to refuse me bonus as I am in my notice period and only pay it to my male colleague instead.

 

As my colleague and I have both worked all year and undertaken the same job role – is it sexual discrimination to refuse me a bonus for equivalent work?

 

If so is there anything I can do to complain or take legal action if they refuse to pay me an equal bonus?

 

Many thanks

 

Lola

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I can't see how this could be anything to do with sexual discrimination.


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A friends advised that to pay a male worker a bonus and not a female worker for equivalent work when both have been employed throughout the full business year is unlawful sexual discrimination.

 

I was just querying whether my friend was correct.

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Your friend would be correct if the reason for failing to pay you the bonus was related to your being female.

However that isn't the case here; the reason is because you are in your notice period

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Ah right thank you for clarifying!

 

Are they allowed to not pay because of the notice period, when there is nothing to this effect stated in my contract or any of the supporting documentation?

 

The paperwork I have just says that bonus is at the Director's discretion based on performance of the company throughout the 12 month period January to December (which I have worked in full and the company has achieved all targets - as seen by the fact that my co-worker is being paid)

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It depends on the precise wording.

 

Can you quote exactly what it says on all the paperwork you have about the bonus?

 

Also, how long have you worked there and have you received a bonus every December?

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I'll look out the paperwork when I get home to see the exact wording - I do know it's only mentioned in one letter and not in my contract or Staff Handbook.

 

I've worked here for 4 and a half years and have received a bonus every Christmas so far which included additional bonuses for the exams I've passed (one of which I passed in the last 12 months and would be included in this year's bonus payment)

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If the bonus is discretionary then it is , most bonus are, as you are leaving I would be be almost certain that the bonus dosnt have to be paid, commission would be different.


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Ah right not worth me arguing against it then. It just seems wrong (morally in particular) to not pay a staff member who has earned the bonus by meeting all the stated criteria just because I'm working my notice period. Especially because we have a newbie starting this month and he will be paid the bonus in full too even though he's not been here for any of the year!

 

I am still employed and will be when bonuses are paid. If I'd known (i.e.: if it was stated in my contract that notice = no bonus) I'd have waited to hand it in for another month.

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oh well we live and learn, agree morally its wrong though, prehaps you may still get a christmas thank you in your final wages if you have left on good terms


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Whether, or not, a discretionary bonus should be paid depends on the precise terms of the bonus scheme.

 

While assisted blonde is likely to be correct in many cases, it's still worth posting the exact wording here.

As some employers have found; simply putting the word discretionary in there somewhere doesn't always give them the 'get out of jail free' card that they think it does.

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As some employers have found; simply putting the word discretionary in there somewhere doesn't always give them the 'get out of jail free' card that they think it does.

 

Absolutely correct! Discretion becomes discrimination very easily and is a claim waiting to happen in many cases. Any bonus or incentive scheme should include very specific qualification and exclusion clauses.

 

In this particular one however, I feel that the employer is just on the side of being able to rebuff any complaint. A bonus serves not only as a reward, but also an incentive to maintain or improve on results in the year ahead, so may be justifiably withheld if the employee has signalled their intention to leave. This is however where wording is important.

 

Custom & Practice is also an issue with 'discretionary' bonuses, however that would only be an argument (as with discrimination) if the employer has previously paid a bonus to somebody in similar circumstances, ie after notice has been given.


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The exact wording in the email I received back in 2008 is:

 

'That you might receive a discretionary end of year bonus in December each year, which will reflect your contribution to the team. Indeed this bonus may be enhanced by payments of 150 pounds for each exam passed'

 

This is the only document provided to me which mentions the bonuses and terms surrounding them.

 

When I first started (in 2008) the bonus paid to myself and my colleague as new starters was £250 each plus exam bonuses, thereafter it has increased each year to reflect our increasing contribution to the team.

 

As fully qualified key team members, last year we received £1000 each and this is what my colleague has been told he will receive again this year.

 

Does this change anything? Or am I stuck with it?

 

Many thanks for all your advice!

 

Lola

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When it states 'That you might receive a discretionary end of year bonus in December each year,' this suggests that the discretion is limited to whether, or not, bonuses would be paid at all.

So that your employer would have the discretion to decide that in a bad trading year they would pay no bonuses.

 

The fact that it's described as an end of year bonus, rather than a loyalty or incentive bonus suggests that any bonus paid is intended to cover the period of that particular year.

Stating that it will reflect your contribution to the team, in the same sentence, further suggests that the bonus is related to that same period. (After all, they wouldn't be able to assess anyone's future contribution.)

Also, your employer doesn't appear to have any issues with your contribution to the team during the year (other than the fact that you'll be leaving after it ends).

 

The custom and practice has been that it has been paid each year.

You will be working there for the full year; so you had a reasonable expectation that, if the decision was made that end of year bonuses were payable, you would be receiving the bonus.

 

There's nothing there stating that there are any other conditions that need to be satisfied in order to receive the bonus.

If your employer had in mind a list of circumstances in which the bonus would be withheld from individual employees these should have been clearly communicated to all employees in advance.

You haven't been told until now that someone who's working their notice period isn't entitled to the bonus.

I don't think that it's reasonable to add this condition only after someone has resigned.

 

I think that a reasonable employer would conclude that you are entitled to the bonus.

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I have to say that taking all of the above into account I have to agree with the post above. The clause is sufficiently worded as to indicate that whilst a bonus 'might' be payable, the only qualifying term is one of 'contribution' and on that basis, it should be paid to all who have 'contributed' or not at all. The grounds for non-payment would therefore have to be a lack of contribution during the qualifying period, so it is reasonable to believe that if you have contributed satisfactorily and are employed for the entire qualifying period that the bonus should be paid. If the fact that an employee is due to leave was a disqualification, then this should be stated in the clause relating to bonus payments.

 

I would suggest a grievance stating that the payment of bonuses in line with the stated qualifying terms strongly indicates an entitlement, and that to withhold the bonus under irrational or unreasonable grounds could, in all likelihood be deemed an Unlawful Deduction or breach of contract. This might force a reluctant reversal of their decision, or might ultimately take a Tribunal to determine whether the employer acted fairly.


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IMO its still discretionary, and even though you may have contributed it is up to them if they pay it, I would suggest that as you are leaving they will say that they didnt feel your contribution was sufficient to recieve the bonus, TBH an employer who is losing a staff member is only going to pay anything that he really has to and is going to look for ways of not making a payment that is discretionary. Yes put in a grievence but dont get too hung up on it, you have a new job and its not worth getting stressed out over your old one.


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Thanks for your replies everyone - definitely food for thought if they end up not paying it this Friday.

 

Assisted Blonde: they honestly don't have a leg to stand on in saying I haven't contributed enough - this past year myself and nice director have practically carried the firm singlehandedly while the husband/wife directors took massive amounts of time off. Plus the newbie receiving a full bonus after only a month hasn't contributed at all so I don't think they would try that argument.

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This is an interesting point, legally speaking.

 

To dissect the law here, it would be based on a claim for breach of contract. There is no contractual entitlement to the bonus here - its entirely discretionary. So at contractual level, there's no breach of contract.

 

However, I do think you have an argument that there is a common law breach. If a bonus clause is discretionary, case law states that an employer may not act in a perverse (irrational) or capricious manner - ie, a manner in which no reasonable employer would have acted. So the law says the employer must act in good faith when determining bonus entitlements.

 

If the employer has been transparent in showing how they determined the bonus, therefore, there is no claim (ie. if they had expressly indicated bonuses are not payable to those in their notice period). Otherwise, I can't see a defence and I think they need to pay up!

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