Your bonus time is approaching and you’ve been looking forward to a holiday, upgrading your car or paying off school fees. It’s been a profitable year, you’ve worked hard and kicked some big goals for the business, so you’re shocked to discover that your employer is not awarding you a bonus. Do you have any recourse when you truly believe that you deserve the bonus outlined in your contract?
Employer’s discretion and disputing your bonus
As a senior manager or executive, bonuses can form a particularly valuable part of your remuneration package. In most contracts, there will be a clause that bonuses will be awarded at the employer’s discretion. However, this doesn’t mean that an employer can refuse to award a bonus on a pure whim.
So, how discretionary is an ‘employer’s discretion’?
According to the law, an employer “cannot exercise that discretion capriciously, arbitrarily, or unreasonably”. So, where you are given no reason, or you have been singled out for unlawful personal reasons, then you can challenge non-payment of a bonus.
Your employment contract may outline the criteria for receiving a bonus, so this should be the first place you go to. Sometimes, the rules appear in a separate bonus policy document, and you may need to obtain a copy.
Be prepared however, since the contract may not set out clearly what the criteria are around bonuses. This can create uncertainty around how an employer plans to award them. It’s important to take expert, independent advice if you feel that you have not been treated fairly on bonus, either if you have received no bonus at all, or significantly less than you believe was due. An employment lawyer will be able to review your contract and bonus scheme and advise you on the best course of action. Often this is through negotiation, but it may be through litigation if this is necessary.
A good time to review the arrangements around future bonus is when you negotiate a new contract. Examine the bonus scheme in your contract, and seek to negotiate provisions and criteria be included to create more fairness and certainty around payment, in order to head off future bonus disputes. You could request certain timeframes for a bonus to be paid or specify the relevant KPIs or performance targets, as well as negotiate payment in the event of early termination, or early achievement of targets.
If you believe you have been unfairly denied a bonus, speak to one of Shine Lawyers employment law experts. They can answer any questions regarding a bonus dispute, negotiating a contract or executive employment and give you tailored legal advice.
Written by Shine Lawyers. Last modified: July 7, 2019.