Failure to pay bonus: ask the expert

My employer has failed to pay my bonus for 2010. On questioning they advised that as I now work part time (due to childcare) I am no longer eligible for a bonus. After advising them this was discriminatory they have now offered me a very low bonus payment of 25% of my maximum and just under half what I usually receive. 1) They are trying to justify by saying my performance for 2010 was not exceptional. 2) They are stating something that has happened in June 2011 as a reason not to pay my bonus for 2010 (due in March 2010). 3) It has taken months to get them to review and make an offer, but I am not happy. 4) Does the 3 months to take them to a tribunal apply from when the bonus would normally have been paid or start from when I have exhausted the grievance procedure? 5)They failed to set objectives for 2010. I did chase, but they are very hit and miss and some years set and some don’t. 6) They state that the bonus is discretionary and they chose not to pay in 2010. They did pay to a male manager. 7) The male manager got about 60% of his maximum bonus. His maximum is lower than mine. They state the % offered to me now is comparable to the one paid to the man and therefore it can’t be discriminatory. However, the % based on max bonus is a lot lower. 8)They state the bonus is discretionary and not contractual. 9) I have a letter from 4 years ago comparing my salary against 2 males they chose in the company. They benchmarked my salary and bonus against the other 2 (men) who had a higher salary and no bonus. 10) I have said if my bonus is discretionary then my salary needs reviewing as I am then on a lot lower package than the 2 men mentioned in 9 above. 11) They state that my job role has changed so this comparison is no longer fair or reasonable. 12) My duties have changed in accordance to business needs and I have been flexible in taking on new taks as requested and with other tasks being shared elsewhere. This has not been at my request and at no time was I advised my role was being reduced or I was being demoted. What are my options?

You do appear to have been treated unfairly by reason of your part-time status. You appear to have three different issues:

1. Non-payment of discretionary bonus in 2010 and 2011 if no objectives were set for this latter year. As your employer is aware that this is discriminatory they are now offering you a low bonus payment;
2. Inequality of contractual pay as benchmarked against two male employees in the Company; and
3. A potential unilateral demotion in your job role/status by your employer.

In order to establish whether you are eligible to make employment claims , I suggest that you obtain specialist advice as the following documents need to be reviewed and an assessment needs to be made based on the specific facts of your situation, not all of which has been set out in your question:

a. your employer’s discretionary bonus scheme rules and any accompanying letters/documents awarding discretionary bonus in previous years;

b. your employment contract and the letter benchmarking your salary against the two other employees with the higher salary; and

c. your existing terms and conditions reflecting the role you currently carry out together with a review of documents relating to the grievances you have raised.

I will try and briefly answer your questions but stress that there are gaps in your information which means that you do need to obtain formal advice.

Discretionary Bonus

A discretionary bonus scheme sets out the terms of operation and payment of any discretionary bonus. If operated correctly by an employer there will not be a contractual right to a bonus payment.

The bonus scheme rules will set out the considerations and factors to be taken into account when awarding a bonus e.g is it based on achieving performance targets in the previous year; is there a reward element for attendance or loyalty; and is there a motivation element?

However, the Courts have held that an employer still has a contractual obligation not to act “capriciously, irrationally or perversely” in exercising its discretion under that scheme. The question is: would a reasonable employer have exercised its discretion and paid you a nil bonus? It appears that your employer paid you nothing while exercising their discretion in favour of a male employee. This would indicate unfair treatment and a capricious exercise of discretion.

If, based on the facts of your case it is found that your employer exercised its discretion capriciously then the following claims may be possible. Each will have different time periods by which to make a claim, again, specialist advice needs to be sought:

1. Breach of contract. This claim is made in the civil courts and is a much longer time period that in the Employment Tribunal. There are however, different cost considerations;

2. Indirect and Direct Sex Discrimination. Under the Equality Act 2010 it is unlawful for an employer to discriminate against you/treat you unfairly because of your sex or part-time status- women make up a higher proportion of the part time workforce by reason of their childcare role. The claims must be brought within three months after the act of discrimination complained of – in this case the non-payment of the bonus. If you haven’t received your 2011 bonus then you might be able to argue that the discrimination amounts to a continuing action, in which case time continues to run until the discrimination stops. The Employment Tribunal may also, if it considers it just and equitable, extend the time period and allow late claims. The Employment Tribunal’s discretion to extend time on this ground is very wide;

3. Unlawful Deduction from Wages. Based on the facts, some claims for non-payment of bonus may be characterised as an “unlawful deduction from wages” if the loss suffered by the employee is quantifiable. This claim is under the Employment Rights Act 1996. Any complaint must normally be made to an Employment Tribunal within three months of the date upon which the wages were due to be paid. If, again, your 2011 bonus was also not paid you could argue there has been a series of deductions and the three months’ time limit
will run from the last deduction; and

4. Unfair treatment as a Part-Time Worker. You may also possibly have a claim under the Part–Time Workers (Prevention of Less Favourable Treatment? Regulations 2000. You have the right to be treated the same as full time employees unless your employer has an objective justifiable reason for this treatment. You can ask your employer for written reasons for this different treatment. The employer must reply within 21 days. If you are unable to reach agreement and you think you can show you have been treated unfairly you can make a claim
in an employment tribunal. This must be made within three months of the date of the less favourable treatment.

The time periods for making the above claims usually start from the date of the breach, the date of non-payment of the bonus. They do not tend to run from when a grievance procedure was exhausted. It, however, may still be possible to file a claim out of time in exceptional circumstances. Again, specialist advice will highlight if this is possible.

Equal Pay

Under the Equality Act 2010, where women and men carry out the same or similar work or work rated as equivalent following a job evaluation study or work rated as of equal value they are entitled to be paid equally. Employer must give women and men equal treatment to all terms and conditions of employment. You may therefore have an equal pay claim if this can be established based on the facts. Equal pay claims can be made at an Employment tribunal while you are in employment or within six months’ of leaving employment to which
the claim relates.

Demotion/Reduction of Role

You need to clarify from your employer if, in fact, you have been demoted and when they think this occurred. As this would appear to be a unilateral change carried out by the employer, you may be entitled to make a claim for breach of contract and potentially, if you felt you had to leave employment because you could not accept this demotion, may have a claim for constructive unfair dismissal.

In order to ascertain whether you have these claims, your job description, title/role and responsibilities in your contract would need to be reviewed against the new role and responsibilities you agreed to take on.

You must seek specialist advice before taking any decision because establishing whether a unilateral breach of contract has occurred will depend upon the facts.

Comments [1]

  • Anonymous says:

    My employer decided not to pay my written bonus as they saw they would have to pay to much. Instead, after the year ended they wrote another calculation that pays me 87,000. I was due 222,0000.

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