Bonus Scheme Solicitors
If you would like to speak to one of our solicitors on a confidential basis about Bonus Schemes for a prospective or current role please call us on 0203 178 5361.
We regularly advise senior employees and high net-worth individuals on bonus schemes – discretionary, contractual,formula-based, floored, fixed, guaranteed and contingent – as well as sign-on arrangements and other short-term and long-term contractual entitlements
Guaranteed or Discretionary Bonuses?
Bonus schemes can take the form of guaranteed or discretionary plans. However, many schemes are a combination of both. Schemes with a discretionary bonus element give the employer a final say in if that bonus is paid, and how much it is worth.
Your terms of employment will outline if your bonus is guaranteed under contract or discretionary. However, the precise nature of your bonus can be complex to ascertain, so it is prudent to take expert legal advice.
A common type of bonus guaranteed under contract is the ‘golden handshake’; securing you a bonus regardless of individual, team or company performance. Such bonuses are often offered in compensation for bonuses lost by leaving a former employer.
If your employer fails to pay this bonus by the date set out in the contract, you would have grounds for a recovery-of-debt bonus claim.
There may be clauses in your contract which stipulate the bonus will not be paid in certain situations, for example if you are found guilty of gross misconduct or if you are not being employed by the payment date.
As the name suggests, the final decision on payment of a discretionary bonus – and how much is to be paid – is up to the employer. However, in effect there is no such thing as a purely ‘discretionary’ bonus. Employers must be rational in their decision and act in good faith. Failure in this regard could be grounds for a bonus claim. The courts will aim to identify the exact nature of the bargain struck between employer and employee in relation to the bonus.
Common Bonus Scheme Issues
- Non-payment of a bonus which is contractual or where discretion is exercised capriciously.
- Identifying the precise circumstances under which a bonus is to be paid.
- Requiring greater understanding of possible bonuses and sign-on arrangements which can be stipulated in a contract.
- Requiring greater understanding of profit-sharing and stock options.
Recent Experience Includes:
- Securing six-figure bonus payments within exit packages under Settlement Agreements.
- Successfully negotiating the payment of a pro-rated bonus on termination.
- Advising on and negotiating discretionary annual bonus schemes, including short-term investment plans.
- Advising on share incentive plans and savings-based share option plans.