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THE RIGHT TO AN ANNUAL BONUS
Question: Does an employee have a right to an annual bonus?
Answer: There is no general duty upon an employer to pay its employees an annual bonus.
Brief explanation: The Basic Conditions of Employment Act of 1997 does not make provision for bonuses. However, if the employer’s business falls in an industry or area where a bargaining council agreement applies, such collective agreement may contain a provision obliging the employer to pay an annual bonus. A contract of employment may also contain a provision referring to a 13th cheque or other bonus (e.g. performance bonus or production bonus). The employer may be contractually bound to pay such 13th cheque or bonus, unless it has been specifically stated that it is subject to the employer’s discretion.
A more controversial matter is where there is no specific agreement to pay a bonus, but where it has become custom or practice to do so. It is arguable that employees can claim a right to a bonus on the basis that it has become part of their terms and conditions of employment. However, the onus in this case would be on the employees to prove that they have acquired such a right.
Note: These snippets of information are based on frequently asked questions and will be circulated to subscribers on a regular basis. Labourwise subscribers are invited to submit questions on matters that they believe would be of general interest to employers.
Disclaimer: The material above is provided for general information purposes only and does not constitute legal or professional advice. Neither the author nor the publisher accepts responsibility for any loss or damage that may arise from reliance on information contained in this article.
Comments
hi I would just like to find out if it is a must to pay an domestic worker a bonus if he/she has only been employed for 4 months and how do I calculate the amount or percentage of the bonus,or even a pro-rata bonus and how it works.
Reply to Marcus: There is no legal obligation to pay a bonus. Most employers do, though. The amount, if anything, is discretionary. Bear in mind that, if you do pay a bonus, there will be an expectation of a bonus in future.
Hi there,
I need to know if a company can despite a high rating being given, reduce the payout of a performance bonus because a person has been off sick too often.
Reply to Karen: The rights surrounding a performance bonus (when an employee is entitled to the bonusand when not) is determined by contract. You would therefore have to look at the wording of the bonus provision to see whether the company has reserved the right to reduce the amount in any circumstances.
Hi there,
Why does the m.e.i.b.c. force employers to pay pro-rata bonusses, even when the company had a very bad year? What does pro-rata means? I f a company cannot afford this bonus, could the company still be forced to pay it? Even if the company has to actually close it`s doors to pay this bonusses?
Response to Christo: The provisions of the MEIBC collective agreement are normally extended to non-parties, which means that all employers in the industry have to comply. If you are unable to pay bonus due to financial constraints, you can apply for an exemption. Another development is that the employers’ association NEASA has challenged the Minister in court regarding the extension of 2011 collective agreement and the outcome is imminent.