To pay or not to pay: the Christmas bonus dilemma

By KMC Human Resources

18 Dec 2014

Christmas time can throw up a veritable feast of HR issues. In our Christmas series of blogs, we have so far addressed the perils of the staff Christmas party and also how to tackle staff holidays and holiday pay.

By Karen Credie, KMCHR.

In this final article of the series, we turn to Christmas bonuses and look at rewarding staff fairly and lawfully.

For many businesses, the payment of a Christmas bonus to reward staff for their hard work throughout the year is a nice thing to do. But get it wrong, and you could find a generous gesture turning into an employment tribunal claim.

If your business has had a good year and you want to issue a monetary reward to staff, there are a few things you need to consider. Are you going to give everyone in the business a bonus? Will the bonus be the same amount for everyone?

If only some members of staff are to receive a bonus, you need to be careful that you cannot be found at fault for discrimination or an equal pay claim. The grounds on which you award any bonus need to be made clear so all employees have an equal opportunity to be rewarded for their work.

Similarly, if you are paying a different amount to different members/teams of staff, the reasons for this need to be explained.

If the business has had a tough year or cash flow is tight, it could be that the payment of a Christmas bonus is just a step too far. However, employers need to be aware that if a bonus at Christmas time has been made for a few years on the run, this could be seen as having become ‘customary’ and therefore it could be argued that a bonus is a staff entitlement. Where this is the case, employers who decide to reduce the staff bonus or not pay one at all one year could find themselves at risk of claims from employees.

Should you wish to maintain flexibility in the payment of bonuses, you need to ensure that any documentation relating to the payment of a bonus, at Christmas or any other time, highlights they are payable only at the discretion of the company and for a discretionary amount. For help and advice on paying bonuses at Christmas time or throughout the year, or if you are facing a claim from an employee based on the payment / non-payment of a bonus, please get in touch with us.

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