Employment Bonus Schemes
Employment bonus schemes can be a great way to align a business’s goals with those of its employees and create real motivation for individuals. If not carefully crafted, employee bonus schemes can create division and conflict, and lead to costly litigation.
Employment Bonus Schemes created with the best of intentions can have perverse outcomes. What if your business faces a sudden downturn and paying previously earned bonuses will threaten the businesses immediate viability?
Every Employment Bonus Scheme should be payable at the employer’s discretion. The exercise of that discretion should be done fairly, and guided by a set and previously determined procedure, which the affected employee should be aware of. Performance yardstick need to be clearly defined and properly measured, if they are to be used, as do the circumstances in which an employer may exercise their discretion not to pay a bonus, even where agreed goals are met. And all of these things should be set out in the employees’ contract.
Finally, an employer’s discretion must be exercised fairly and not capriciously, arbitrarily or unreasonably, and must be based on evidenced material to avoid an employer being caught up in costly litigation.