Implications of non payment of bonuses

[Psychobert]

Have a potential client who has posed me a tricky problem. For the last three or four years they have paid a performance related bonus to employees, which is not in their written contracts, (though is verbally offered at interview and is therefore understood to be part of conditions of work). Problem is, although they have done very well in the financial year about to end, (well above targets) the following year looks bleak so they are planning to not pay the bonus, (level is agreed in about June and paid at the end of the summer).

My task is to find a way to motivate and retain key members of the team. Not so easy, but not the first time I've faced it in the last few months. The organisation has basically said that as the bonus is not in the written contract, 'tough luck, we're not paying it, times are hard'. However, I don't understand if there are any legal implications to withdrawing what feels to me to be like a condition of work; many people would not have accept the role at the current salary without this bonus payment.

I have a suspicion that the company is playing games (i.e are just wanting to withdraw the bonus anyway) and using me to deliver bad news. Again not the first time this has happened, but I'm not sure of the legal implications of their proposed course of action, (if any).

Any ideas?

[mondeoman]

research "custom and practice".

Its a legal minefield, but if its "customary" to pay an annual, profit related bonus, the Co. could be on a very sticky wicket, and in the worst cases can lead to "constructive dismisals"!

[Psychobert]

Thanks, 'custom and practice' was the phrase I was searching for..

I'm going to walk from this one. My post was prompted by an email I received from a hotmail account this evening which was clearly from someone in the company I'd spoken to today wanting my thoughts on paper by close tomorrow. Deeply suspicious that its not on the company email system, (I suppose their server could be down). I think they want me to put on paper that its ok to not pay the bonus (and this is what we'll do about retention etc) amd will point the finger to me if I do and it subsequently goes t1ts up. It felt wrong the minute I started talking to them..

[mondeoman]

ouch! I first found out about it when I was researching redundancies and commission payments, and as I said above its legally a veritable minefield.

I'd say you're best not to get involved in the decision at all if you can avoid it, and certainly don't say its OK until you've taken good legal advice.

Good Luck!

[JustinP1]

Psychobert said:

Thanks, 'custom and practice' was the phrase I was searching for..

I'm going to walk from this one. My post was prompted by an email I received from a hotmail account this evening which was clearly from someone in the company I'd spoken to today wanting my thoughts on paper by close tomorrow. Deeply suspicious that its not on the company email system, (I suppose their server could be down). I think they want me to put on paper that its ok to not pay the bonus (and this is what we'll do about retention etc) amd will point the finger to me if I do and it subsequently goes t1ts up. It felt wrong the minute I started talking to them..

Their main thinking should not be the legality of it, but withdrawing a bonus which is not only accepted but expected, promised and deserved is the quickest way to make your best employees treat you with disdain, never trust you again and not want to put in the same effort.

Similarly the not so good employees who worked hard only for the monetary reasons will now sit on their laurels for the next financial year.

Whatever they 'save' will be lost tenfold in profits lost from a workforce who can no longer want to put in 100%.

Not only should keep the bonus, if they really want to pull their behinds through a downturn they should announce the doubling of the bonus for next year.

[Psychobert]

JustinP1 said:

Their main thinking should not be the legality of it, but withdrawing a bonus which is not only accepted but expected, promised and deserved is the quickest way to make your best employees treat you with disdain, never trust you again and not want to put in the same effort.

Similarly the not so good employees who worked hard only for the monetary reasons will now sit on their laurels for the next financial year.

Whatever they 'save' will be lost tenfold in profits lost from a workforce who can no longer want to put in 100%.

Not only should keep the bonus, if they really want to pull their behinds through a downturn they should announce the doubling of the bonus for next year.

That's pretty much what I've advised them so far. Taking away a bonus at this stage when its not only been earned, but banked and accured for throughout the year is going to seriously piss off those that have managed to break their stretch targets by about 15% on average over the last 12 months. If they do this, a good proportion will walk almost stright away and the rest will follow as soon as they feel the economy is safe to do so.

I'm not getting involved in this project. I understand the company's position financially but I think they are not being straight with me or their employees.