Bonuses 101: A Guide to Managing Bonuses

Many employers routinely consider the award of bonuses to their staff at this time of year and inevitably this leads to disputes with some staff members about the failure to award a bonus to them at all or at a particular level. In this blog, we set out some factors of which employers should be mindful when making bonus-related decisions.

Entitlement to a bonus

The contractual status of a bonus is a significant factor to consider. Generally, offer letters and employment contracts outline eligibility to earn a bonus without explicitly guaranteeing it. They often state that the bonus scheme's operation and the amount awarded are solely at the employer's discretion. Bonuses are typically contingent upon the employer's business performance, the employee's work performance, or a combination of both during the previous year.

Even if bonuses are described as discretionary, there might still be a contractual entitlement to them implied in the employment contract. This could happen when an employee consistently receives a bonus at a particular level over an extended period due to custom and practice. If a contractual entitlement exists and the employer fails to pay the bonus, it could lead to a breach of contract claim or a complaint about an unlawful deduction from wages. It may also contribute to a constructive dismissal claim. In some cases, bonuses might be factored into loss of earnings awards in unfair or constructive dismissal cases.

The entitlement to a bonus may be contingent upon the employee remaining employed (and not serving notice) at the time of the award and not facing any performance or disciplinary issues. However, in instances where no express condition exists, courts have rejected implying such terms.

Employers should be aware that even if they have the discretion to terminate a bonus scheme, they cannot withhold bonuses that employees have already earned and accrued under the scheme as it was at the time. This means that once employees meet the conditions for earning the bonus, they have a right to receive it.

Exercising discretion to award a bonus

Bonuses are typically evaluated based on objective individual and/or business performance criteria. Employers must clearly define the criteria and decision-makers responsible for awarding bonuses at specific levels. Bonuses may come in various forms, including stock options, subject to the scheme's terms. However, caution should be exercised to avoid conditions that could be seen as a restraint of trade or penalty clause, as these might be deemed void due to public policy considerations.

In cases where bonuses are discretionary, employers cannot exercise their discretion arbitrarily or unfairly. The decision-making process must be carried out in good faith, consistently, and in line with the implied duty of trust and confidence. While equality laws do not require identical treatment of employees, employers should be especially cautious not to discriminate based on any protected characteristics. Ensuring fairness and transparency in bonus allocation fosters a positive work environment and reinforces the employer-employee relationship. Employers should be mindful to avoid any discrimination amongst employees based on any protected ground(s):

• Gender
• Marital status
• Family status
• Age
• Disability
• Sexual orientation
• Race
• Religion
• Member of the Traveller community

Employees on leave

Care should be taken regarding employees absent on sick leave during the performance year.

The general principle in relation to maternity leave is that where a bonus comprises payment for work done, an employer is entitled to make a pro rata reduction in the bonus award for an employee’s absence on leave. However in many cases, there is scope for dispute about whether bonuses are in respect of work done. This area can be fraught with risk, and close consideration should be paid to whether a bonus is expressed to relate to company performance only or in combination with individual employee performance.

Mental Health Adjustments

What are reasonable adjustments for mental health?

Reasonable adjustments are changes an employer makes to remove or reduce a disadvantage related to someone's disability.
Some people might not recognise their mental health condition as a disability, but it's important that employers are aware that it could be. Disability is defined as a mental or physical impairment that has a substantial and long-term adverse effect on a person's ability to carry out day-to-day activities.
Employers must make reasonable adjustments for:

• workers
• contractors and self-employed people hired to do the work
• job applicants

Employers must make reasonable adjustments when:

• they know, or could reasonably be expected to know, someone is disabled
• a disabled staff member or job applicant asks for adjustments
• someone who's disabled is having difficulty with any part of their job
• someone's absence record, sickness record or delay in returning to work is because of, or linked to, their disability

Employers should try to make reasonable adjustments even if the issue is not a disability. Often, simple changes to a person's working arrangements or responsibilities could be enough to help them stay in work and work well.

Making reasonable adjustments for mental health
Mental health includes our emotional, psychological and social wellbeing. It affects how we think, feel and behave. If an employee has a mental health problem, it's important their employer takes it seriously and with the same care as a physical illness.
Mental health problems can:

• happen suddenly, because of a specific event in someone's life
• build up gradually over time
• be hard to spot because everyone has different signs and signals
• be hidden because many people find it difficult to talk about their mental health
• fluctuate over time which means that an employee's ability to cope with the demands of the job might change

When making reasonable adjustments for mental health it's helpful to remember that:

• every job is different, so what works in one situation might not work in another
• every employee is different, so what works for one employee might not work for another
• mental health fluctuates over time, so what works for an employee now might not work in the future

Employers and employees should work together to agree and review reasonable adjustments over time to make sure that the adjustments work well.

Benefits of reasonable adjustments for mental health
Reasonable adjustments for mental health can help employees to stay in work while recovering from or managing a mental health condition. They can also help employees work safely and productively.
Reasonable adjustments for mental health can help employers to:

• retain employees, reducing recruitment and training costs
• reduce absence and associated costs
• make sure that people at work are well, safe and productive
• create a healthy work culture, building mental health awareness and demonstrating a commitment to good practice

Responding to reasonable adjustments for mental health requests
As an employer, you should work together with your employee to agree reasonable adjustments for mental health.
Everyone's experience of mental health is different, and mental health can fluctuate over time. This means that identifying, agreeing and monitoring reasonable adjustments can take time. It also relies on you and your employees talking openly so that everyone's needs can be met.

Preparing for a meeting to discuss reasonable adjustments for mental health
Many people find it hard to talk openly about mental health, especially when they are under pressure.
It can be helpful for you to:

• look through any organisation policies relating to mental health, absence and reasonable adjustments – the policies should make it clear what is expected of you and your employee
• think carefully about how confident you feel talking about mental health at work – you might find it useful to learn more about supporting someone with their mental health at work
• put yourself in your employee's position and think about what is going on for them and what they might need to support their mental health at work

What to think about before responding to a request for reasonable adjustments
You should take time to prepare for a conversation with someone about reasonable adjustments.
It's normal for people who are experiencing mental health problems to be unsure about what they need to manage their mental health. Many people might not feel ready to decide what adjustments to suggest. This is why it's helpful to take a flexible approach, regularly monitoring and reviewing what works, and what does not.

There are several things you can think about which could help with deciding what reasonable adjustments will be possible.

1. Look through the examples of reasonable adjustments
2. Think about:

• what might be possible given the employee's job
• what might the impact of these adjustments be on their ability to do the job to a satisfactory level
• what might the impact of these adjustments be to the rest of the team
• could any risks to performance or others in the team be minimised

      3. Get advice from an occupational health professional
      4. An occupational health professional can give you advice on what adjustments might be suitable.

Have a conversation and agree a plan with your employee
You should meet with your employee to discuss reasonable adjustments and agree a plan.
Before the meeting you should:

• agree a time and place for the meeting
• share any policies that are relevant to reasonable adjustments for mental health
• explain to them the meeting is to help find a solution that will help them to stay well at work
• explain to them that some things might be possible and some things might not be but you're willing to support them access adjustments that are reasonable

Some people with mental health conditions find it difficult to concentrate or remember things. It can sometimes be helpful for employees to bring a trusted person to take notes on the conversation for them to refer to after the meeting.
The meeting might include:

• checking in on how they are
• explaining what the organisation policy is on reasonable adjustments for mental health
• asking them what reasonable adjustments they would like to explore and why they think these will be helpful to them
• discussing how the reasonable adjustments could work in practice
• agreeing the reasonable adjustments to try
• agreeing a plan to review and monitor the reasonable adjustments
• sharing what ongoing support is available

After the meeting
After the meeting you should confirm the agreed reasonable adjustments in writing.
Trial and monitor the reasonable adjustments
It's useful to monitor reasonable adjustments once they're in place.
You might sometimes find that reasonable adjustments:

• take time to work well as new routines are established
• need to be adapted to work effectively for everyone
• do not resolve the initial problem and need to be reviewed

Monitor the reasonable adjustments using the approach agreed during the meeting and keep a record of any changes made over time.

Put in place ongoing support and a process to review the reasonable adjustments

Mental health problems can last for a few weeks, months or longer-term. It's important that reasonable adjustments are reviewed on an ongoing basis.
You might find it useful to arrange follow-up meetings to discuss how the work adjustments are working. These meetings might be weekly, monthly or less frequently depending on the situation.

Before the meeting it can be helpful to:

• agree with your employee when and where the meeting will take place
• how you and your employee will know if the reasonable adjustment is working or not
• agree what to do next if the reasonable adjustment is not working

Posted in Health & Safety