If an employee feels entitled to an annual bonus which the company then removes, what can they do? Esther Smith, partner at Thomas Eggar, and Martin Brewer, partner and employment law specialist at Mills and Reeve, offer legal advice.
The question:
I have worked for my current employer for six months. On joining the company I was placed on a set salary, plus an additional sales bonus scheme. In my initial interview I was told of annual bonus paid in December each year. I have been advised that as I am on this sales bonus scheme, I am not entitled to the yearly bonus. I have checked my contract and although the yearly bonus is not mentioned, it does not state that I am or am not entitled to it. In the generic staff handbook it states ‘the company also operates an annual bonus scheme, which is dependent on personal performance and annual profits of the company.’
I was given the reason that I was not entitled to it due to receiving the sales bonus scheme throughout the year (this is target based due to my role being sales). In connection with this query, I was advised that the targets would be reviewed throughout my employment, as they were brand new and unsure whether realistic and achievable. Also my supporting team member left and was never replaced, so the targets were based on a team of two and have not been amended since she left.
I would like some advice in regards to this, as to whether I have grounds to pursue this any further and question the payment of the yearly bonus. may I add also, that I have only been paid once for target bonus.
B Pearce
Legal advice:
Esther Smith, partner, Thomas Eggar
Employers tend to try to keep bonus arrangements flexible to ensure that they can be changed and adapted to meet the needs of the business, and keep employees motivated to achieve.
In the absence of any contractual provision stating that you have a right to the yearly bonus there does not appear to be much you can do about enforcing it. From what you say about your contract and the handbook you do not have a contractual right. The only possible angle you may have would be if you could show that the non payment of it to you, when it was paid to other employees who did not have an express contractual right to it, amounted to some form of discrimination. In order for this to be actionable discrimination it would need to fall within one of the protected categories, such as age, disability, gender etc.
On the sales bonus, again unless the company is in breach of some express or implied contractual term there is little you can do. As mentioned above bonus schemes are deliberate vague to keep them flexible and from the information provided I do not think that you are in a position to take any action against your employer in this respect.
Esther Smith is a partner in Thomas Eggar’s Employment Law Unit. For further information please visit Thomas Eggar
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Martin Brewer, partner and employment law specialist, Mills and Reeve
It seems to me that this is a purely contractual issue. Does your contract entitle you to the annual bonus? From your question my view is that you concede that it does not. Although the annual scheme was referred to, it is not in your contract. On the contrary, you have been offered and accepted the annual bonus and specifically told that because you are on the sales bonus scheme you are not entitled to the annual bonus. I do not think this is something you can pursue from a legal perspective.
You also raise the question on the target bonus. This again seems to me to be problematic for you. If the scheme does say that the bonus is target based and that the targets are set by the employer then that is the contractual position. To argue that targets have to be objectively realistic (so for example adjusted if a team member leaves to make the target achievable) would require you to persuade a court that it is necessary to imply a term in the contract to that effect and I just cannot see a business reason why a court would do that.
Martin can be contacted at: martin.brewer@mills-reeve.com
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