Bonus Payment Disputes

Bonus schemes enable employers to attract and retain highly skilled and talented individuals by providing an incentive for high levels of performance. Unfortunately, the use of bonus schemes can also give rise to disputes by employees if they believe they should have received a bonus payment or the payment made was below what they expected. Disputes of this nature are more likely where the terms of a bonus scheme are not made clear in writing in an employment contract, or their operation is discretionary.

If you find yourself in dispute with an employee over bonus payments, it is highly advisable that you seek legal advice from an experienced employment solicitor as soon as possible. The specialist employment lawyers at Wilford Smith can provide direct representation, as well as ongoing support, with a comprehensive range of employment issues. We have a proven track record when it comes to advising employers in bonus disputes with workers, as well as those involving executives and other senior company members.

Contact us on 0808 164 1349 or complete our online enquiry form to find out how we can help with disputes relating to bonus payments.

Our bonus payment disputes Solicitor will review the basis of any bonus payment dispute/ claim to determine your legal position and recommend the best course of action to achieve an early, efficient, and amicable outcome.

What types of bonuses can result in employment disputes?

Discretionary bonuses

The majority of bonus schemes are expressed to be discretionary and will typically include a form of criteria, such as achieving individual or company targets, which will determine the extent of any bonus. Often these bonus agreements will allow the employer to reserve the right to decide if a payment will be made – as a result, the issue of employers unfairly exercising this discretion can easily lead to disputes.

Case law has established that employers do not have unfettered discretion when it comes to such bonus arrangements, but bonuses can be withheld if an employer acts in good faith and decides not to pay bonuses on reasonable grounds. Our solicitors can advise you on your rights to exercise your discretionary rights to refuse bonuses and to demonstrate that doing so was reasonable in the circumstances.

Contractual bonuses

Bonus arrangements are clearest when they are expressed contractually and are based on a specific formula. This may be linked to individual performances or the achievement of particular targets, either by the employee or the company as a whole. Employers should take care when refusing bonuses if these arrangements are in place, as doing so can give rise to a claim for breach of contract and/or constructive dismissal. Our employment team can advise from the earliest stage if you feel you have grounds for refusing a contractual bonus to ensure your position is protected.

Bonus payments on termination of employment

Disputes could arise over whether or not an employee whose contract of employment has been terminated, either as a result of their resignation or dismissal, should still receive a discretionary bonus that they would otherwise have been entitled to if they had continued in their role. Factors that should be considered include:

• When an employee has been dismissed, the reason for their dismissal
• Any bonus clauses in the employee’s contract – this may state that an employee must be in their role on the bonus date or that they must not be working under notice
• Whether the employer has elected to make a payment in lieu of notice (commonly known as PILON) and how this may affect any bonus clause

When can an employee bring a claim in respect of unpaid or underpaid bonuses?

An employee may be able to bring a claim against an employer in respect of unpaid or underpaid bonuses in a number of situations, including:

• Where there has been an unlawful deduction from their wages (under section 13 of the Employment Rights Act 1996 (ERA 1996))
• Where there has been a breach of contract or wrongful dismissal in the High Court or a county court
• If the bonus scheme was operated in breach of discrimination legislation
• If an unfair dismissal claim has been filed in the employment tribunal.

Why Wilford Smith Solicitors?

Wilford Smith was founded over 30 years ago and is now considered one of the UK’s most prestigious law firms, has developed a richly deserved reputation for excellence in our core areas of law, including employment and HR. We are more than just a law firm; we are your trusted legal advisor and will be there at every step of your commercial journey. You are never alone. The advice, support, and representation we provide to your business will be tailored to your needs and specific to your industry sector. You can be assured that with our team managing your employment law matter, exceptional outcomes are the norm.

Our employment law teams are based in Sheffield and advise and represent clients throughout England and Wales. Contact us today on 0808 168 5813 to find out how we can help with disputes concerning bonus payments.