Bonus schemes are normally set out as ‘discretionary.’ Whilst the relationship continues, an employer is normally inclined to reward achievements out of common interest but on a termination, things can become a lot more heated.

The senior courts have repeatedly challenged employers abuse of this approach and a number of cases have found an employer does not have an absolute right to withhold bonuses. Employers must exercise any discretion in good faith and not make decisions which are perverse.

Where an employee has raised legal issues (whistleblowing or complaints about discrimination) an employer cannot misuse this discretion as revenge. This can be victimisation, a type of discrimination. If there is a reason for not paying the bonus provide details so we can set out your challenge.

If the bonus is clearly set out in a contract of employment or other document, it can be easier to enforce.

Deferred compensation (restricted stock units) are common in the City and financial institutions. They link the employer’s needs with loyalty and high standards of conduct over a period of time; normally beyond the leaving date.

“Long Term Incentive Plan” are common in banker’s contracts. Challenges are often raised on the basis that the employee is not a ‘good leaver’.

Key things to think about:

• Payments in lieu of notice- this may affect employed status at the time for payment
• What does the contract say about bonuses and PILON clauses?
• How did the employer bring these rules to your attention (if at all)?
• Where there is no PILON clause, refusing to pay your bonus during the period of notice will normally be a breach of contract

New rules will be brought in to cap European bankers’ bonuses as of 1 January 2017. The legislation will apply to all ‘Code Staff’ (senior managers or those performing significant influence functions). The cap sets a limit on bonuses at 100% of basic salary, but this can be 200% of salary with shareholder approval. A minimum of 25% of any bonus exceeding 1 x salary must be deferred for at least five years in the form of long-term deferred instruments (LTDI’s)

Entitlements to bonus and maternity leave are frequently the source of disputes for obvious reasons. Where there is a contractual bonus entitlement a ‘maternity equality clause’ is implied into the contract. The law only entitles you to pay you for the relevant part of the bonus year:

• during which you were at work before going on maternity leave;
• during which you were absent for the 2 weeks’ compulsory maternity leave; and/or
• during which you were at work after your return from statutory maternity leave.