Discretionary Bonus Payments
A recent employment appeal tribunal decision is likely to be of interest to businesses which offer what they consider to be discretionary bonus plans and to employees who expect to receive such bonuses.
In this case a group of employees claimed they had a contractual right to a performance related bonuses. The employees who worked in a warehouse had had their employment transferred and retransferred between two employers. The case centred on whether the bonus payments the claimants expected were discretionary or a contractual entitlement.
The tribunal considered a number of facts in its judgement including that prior to the first transfer of employment bonuses had been regularly paid to staff (for almost forty years). In addition, the tribunal held that the discretion could relate to more than just discretion to pay a bonus, the term could also relate to something else such as discretion in the way a bonus is calculated.
The tribunal upheld the appeal by the group of employees and remitted the case to a different tribunal to determine whether the bonus scheme had contractual effect. Crucially the tribunal held that labelling a bonus scheme as discretionary does not of itself prevent it from having contractual effect.