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Bonuses and incentive schemes


What is a Bonus?

Bonuses are payments that you get in addition to your regular pay. They are usually linked to your personal performance, your team’s performance or the organisations overall performance.   Bonus and incentive schemes can be discretionary or contractual. A discretionary bonus scheme will give you the right to be considered for a bonus or incentive payment but it doesn’t mean that you will automatically receive one. Your entitlement to a bonus should be stated in your written statement of employment particulars.

If your right to a bonus is not written down, it can be implied if it has previously been paid on the basis of custom and practice. In the case of Frischers Ltd v Taylor 1979 [EAT], a Christmas bonus had been paid to employees for several years. Frischers Limited said that it had the discretion to withhold payment of the bonus. The Employment Appeal Tribunal decided that through years of custom and practice there was an implied term that the bonus would be paid. Even if the bonus schemes has discretionary elements, it may still be enforceable. In Small and others v Boots Company Plc. and Another [2009] the EAT said that simply describing a bonus scheme as discretionary does not give the employer the right not to pay it.


Pregnancy and maternity leave

The Equality Act 2010 protects pregnant women and those on maternity leave when it comes to contractual pay and bonuses.


What if your employer does not pay your bonus?

Section 27 ERA 1996 defines wages as , “any sums payable to the worker by his employer in connection with his employment, including any fee, bonus, commission, holiday pay or other emolument referable to his employment“. This applies whether or not it is mentioned in the employment contract and includes bonuses, sales commission and performance related pay.  If your employer does not pay your bonus, or pays less than is due it would be an unauthorised deduction from wages. A deduction is when you are paid less than the total amount that you are due. The law provides the criteria for when a deduction from your wages or salary can be made lawfully by your employer. Any situation that falls outside of the criteria will be an unlawful deduction, and you will have the right to pursue a claim in the employment tribunal.

You must make a claim for a specific amount of money in your grievance. If you are not sure about the amount, then your claim does not fall under an unlawful deduction under the Employment Rights Act 1996, and you must make a claim for breach of contract instead, or make your claim in the county court. Under the Deduction from Wages (Limitation) Regulations 2014 claims for deductions from wages are limited to two years from the date of the deduction.

If your employer makes any unauthorised deductions from these payments you will have a claim in the employment tribunal or county court.

If you want to make a claim for a bonus payment as an unauthorised deduction of wages, you should make sure that you know the exact amount of money you are claiming. If you are making a claim for a discretionary bonus that does not have a real formula for calculating the amount, you should make a breach of contract claim instead.


How to make a claim for non-payment of your bonus

You must start of by raising a grievance, and consider that your grievance could end up before an employment tribunal and take account of the time limits for an employment tribunal claim. Time limits could expire before the end of the grievance and appeal procedure. The normal time limit for making a claim in most employment cases is three months less one day. Calculate your time limits including weekends and bank holidays and remember that you must go through free ACAS Early Conciliation before submitting a tribunal claim.

Updated: 18/02/2020


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