Do these TUPE employees still have a right to their undefined bonuses? Martin Brewer and Esther Smith advise.
The question: Bonuses for all?
I work for a company who have some employees following a TUPE transfer a few years ago. We now have issues around who we can, and cannot pay bonuses to. If these employees have transferred under TUPE, do they retain their original terms and conditions of employment, even though their original employer is now defunct?
Is there an argument for bonuses to be continued to be paid, even if not explicitly stated in the original contract? We also have an employee who did not transfer under TUPE, and holds a different contract that does not state bonus, but has received a bonus this year.
Martin Brewer, partner, Mills & Reeve
Staff who transfer under TUPE have their transferred terms and conditions protected unless and until they agree any changes to those terms and conditions. If the contract contains a bonus scheme (express or implied) then the transferee employer will have to comply with its terms unless it agrees any amended scheme or indeed no scheme at all.
I’m not sure what you mean when you ask "is there an argument for bonuses to be continued to be paid, even if not explicitly stated in the original contract". If there is no written scheme presumably there’s an unwritten one otherwise why would bonuses be an issue at all. It is perfectly possible to have an implied term to the effect that a bonus will be paid although it seems somewhat unlikely (how would anyone know how the bonus is to be calculated for example). And yes, of course an employer can pay a bonus to an employee even if there’s nothing in the contract.
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Esther Smith, partner, Thomas Eggar
A contractual entitlement to something, including a bonus, can arise as a matter of custom and practice and therefore does not necessarily have to be explicitly referred to in the contract. However, it is hard for an employee to imply a contractual right to something without any supporting documentation. However, by way of an example if an employer routinely paid all employees an additional week’s pay at Christmas as a bonus, and had done so for ten years without ever suggesting that this was discretionary, and without deviating from the custom, an employee may be able to argue that their have a contractual right to that additional week’s pay.
With regard to the employee who does not have a bonus written into their contract, but received one last year, I don’t think that you have an issue here as what you say does not suggest that there has been sufficient course of deal to create a custom or practice here. However, as a matter of good practice, you should make sure that any paperwork relating to the payment of a bonus on an ad hoc, non contractual basis makes it clear to the employee that this is a one off discretionary bonus.
Esther Smith is a partner in Thomas Eggar’s Employment Law Unit. For further information, please visit Thomas Eggar.