A bonus, or commission, is a promise of benefits made by a manager or employer to an employee. It is an addition to normal pay and is in return for exceptional or extra work. The benefits can be financial, share options, a loan, profit share, or a partnership arrangement.
Bonuses are governed by contract law and careful analysis is needed to determine the value of the bonus in relation to the work carried out. When bonuses are ‘discretionary’, it is the employer who decides whether a bonus is payable and how much is paid.
Disputes between an employee and employer can arise because a change in business circumstances has led to a change in the discretionary bonus or promise since it was first offered.
An employer may feel that the changed circumstances are good reasons to refuse a bonus. An employee may think that the reason given to refuse it or change its terms sounds spurious.
Nearly all disputes about bonuses or commission payments stem from poor drafting of the contract of employment. In such cases, it is advisable for employers or employees to seek legal advice.