Are you entitled to a ‘discretionary’ bonus? Contrary to popular belief, the payment of so-called discretionary bonuses are not purely at the whim of the employer.
For over a decade now, it has been the case, where your employer has a contractual obligation to exercise a discretion in relation to whether you are awarded a bonus or not and how great that should be, that discretion must be exercised honestly and in good faith and not arbitrarily, capriciously or irrationally. A recent case has confirmed that the reason for this position is that the decision-maker is not allowed to abuse its power when coming to its decision. For instance, your boss simply not liking you would not be a rational consideration.
It is very normal that City employees, will (as set out in your contract) be eligible to participate in bonus schemes and that any award (or not as the case may be) is at the discretion of the employer. Such a bonus scheme would mean that your employer must act honestly and in good faith as above.
So in a case where a discretion exists, and you are awarded a nil or very low bonus (e.g. when there is no rational reason for it), it could be the case that your employer has not exercised its discretion properly. So what can you do?
Well, in the first instance you should ask for details of how the amount of your bonus award (or not) has been determined. If there is no answer or you are not satisfied with what you are told, you should consider pursuing a grievance in accordance with your employers procedures – usually as set out in your contract and the staff handbook. If you remain dissatisfied with the outcome of your grievance you need to consider if you have grounds for a claim against your employer. It helps to take legal advice to come to an informed conclusion as the courts have not in recent years made it easy to challenge discretionary awards, so opinion from a lawyer specialising in work pay and bonus disputes is what you need.
Of course, if you think your bonus award is influenced at all by some form of unlawful discrimination or because you have made a whistle blowing allegation, these are further grounds upon which you would be able to bring a claim.
So the bottom line is, if you genuinely think your bonus has been affected by an improper exercise of your employers discretion, it may be you can do something about it, rather than just accepting your lot.
John Marshall is an Employment Solicitor at Slater and Gordon Lawyers in London.
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