Don't skimp on the bonus!

The UK has dipped into recession, and many companies are looking to improve cashflow.

Bonuses may have been earned on good performances earlier in the year when business was good but are now due to be paid.

Don’t skimp on bonus payments!

Whilst most bonus schemes are expressed to be discretionary, where the bonus criteria are satisfied by an employee then the employer must act in good faith and have grounds for not paying it which have been communicated to staff beforehand.

If a bonus has by ‘custom and practice’ been regularly paid, an implied term to pay may have become incorporated into the employment contract.

A recent employment tribunal awarded a salesman a six-figure sum. He had spent months negotiating a multi-million-pound deal.

Following a company restructure, he only a received a third of the bonus, so he resigned and successfully claimed constructive dismissal and his full bonus.

Deciding not to pay a bonus to save cash may backfire and not only end up costing you more but may mean you’re losing staff.

The best way to deal with bonus payments and schemes, is to set them out clearly in writing.

A discretionary bonus scheme should be clearly labelled as such, and if possible changed each year.

It is also good practice to provide in the contract of employment that no bonus will be paid unless the employee remains in employment, and is not under notice at the time the bonus is due to be paid.