After leaving a job, your entitlement to a bonus will depend on your employment contract and company policies. If it is a contractual obligation, you are entitled to your bonus providing you meet the requirements; however, if the bonus is discretionary, you may not be entitled.
If you have an issue with your salary or your bonus at work, it is highly recommended you seek legal advice. Our employment law solicitors have extensive experience in assisting senior executives who become caught up in complex pay disputes. We can provide coaching and tactical advice and can provide direct representation on your behalf when required.
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Types of Bonuses
There are typically three types of bonuses:
1. The Discretionary Bonus
Disputes often arise over the discretionary bonus scheme. The term "discretionary bonus" itself is misleading, as it does not mean there is no obligation for employers to pay.
It is a common misconception that an employer can freely decide whether to award a discretionary bonus or not. There is case law to support the fact that employees can claim an entitlement to a bonus where there is a reasonable expectation based on the past treatment that a bonus would be paid.
These bonuses are usually awarded based on company performance to motivate or reward an employee's performance at the employer’s discretion. The employer has the freedom to determine whether to offer a discretionary bonus and how much to award, and because of this, they are not guaranteed.
If you leave your job before the bonus has been paid out, you may not be entitled to receive it.
2. Contractual Bonus
Contractual bonuses are payments specifically outlined in the employee’s contract, stating the conditions under which the employee is entitled to the bonus, such as achieving individual performance targets.
Once the conditions are met, the employer is obligated to pay the bonus to the employee.
If you meet the necessary conditions of the contract and leave the company before the bonus payment date, you are still entitled to it as it is a legally binding contract.
3. A mix
The bonus scheme can combine both discretionary and contractual bonuses, where the employees have a contractual right to participate in a bonus scheme while the amount of the bonus is discretionary.
Bonus Entitlement - Legal Advice
In the event of a dispute, the County or High Court will examine the contract to determine the intended nature of any bonus, regardless of the bonus clause you have. Such an expectation provided is supported by clear evidence that can turn a discretionary bonus into a contractual entitlement.
We have advised many employees on their entitlements to bonuses and will guide you smoothly through any pay dispute, advising you fully every step of the way. Where it can be found that a bonus is a contractual entitlement, an employer will be open to a breach of contract claim.
A discretionary bonus, however, may become a contractual entitlement over time, where employers give regular and similarly calculated payments over a period of time. In so doing, the nature of the 'discretionary' bonus transforms to become an implied term of the contract of employment.
In some cases, the entitlement is for the employee to be considered for a discretionary bonus, but no right exists which guarantees they will receive a bonus. The term 'discretionary' does not mean that an employer can act subjectively when deciding who should get a bonus or how much an individual should be paid, especially where there are employees in similar positions with similar levels of achievement.
You may or may not be entitled to any outstanding bonuses after the termination of employment. In the event of gross misconduct, it is often seen as waving any rights to potential unpaid bonuses. However, if you feel you were unfairly treated during termination, you may be able to make a claim at an employment tribunal to receive compensation for unfair dismissal, loss of earnings and the remainder of the bonus.
Receiving a bonus whilst on Maternity Leave
If your employment agreement has a contractual bonus entitlement, it typically implies a "maternity equality clause" that entitles you to receive a bonus if you take statutory maternity leave during the bonus year.
However, you will only be paid for the relevant part of the bonus year that you were at work before maternity leave, absent for the two weeks of compulsory maternity leave, and/or at work after returning from maternity leave. If the bonus is discretionary, your employer must exercise discretion in good faith, considering the work you've contributed during the relevant periods, including while on maternity leave.
If your employment contract does not have bonus clauses, but your employer decides to pay bonuses to other employees, the law suggests that you should also be considered for a bonus on a pro-rata basis for the periods that you have worked.
Flexible Cost Options for your Case
Cavendish Employment Law is founded on the ethos of providing responsive, solution-focused legal advice with full transparency as to cost. We understand that handling an employment law issue against a sizeable corporation is stressful enough with the worry of cost.
We provide executives and employees with flexible cost options including fixed fees, capped fees, hourly charges and insurance coverage. Depending on the value of the claim, we can provide advice on a 'no-win, no-fee basis.
Contact our Employment Solicitors for Bonus Disputes
We are a team of high-calibre employment law litigators, recognised for our advocacy skills and excellent client satisfaction. We specialise in handling complex and high-value claims on behalf of directors, executives, senior management and employees, particularly in the financial industry.
We also advise SME's, Charities, Schools and other organisations on employment law matters. We are experts in the employment field with an outstanding track record of success in contentious cases against some of the City's largest institutions.
Contact our employment lawyers on 0207 1674800
