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chris-hadrill-profileChris Hadrill, a specialist employment solicitor at Redmans, answers the question:

“I am currently negotiating a settlement agreement with my employer and am arguing that I should receive a pro-rata proportion of this year’s bonus payment. My employer is refusing this so far. What can I do?”

There are two separate sets of questions in the above: whether an employee is legally entitled to receive their bonus upon termination of their employment and, secondly, whether it is common for employees to receive a bonus under their settlement agreement even if they aren’t legally entitled to it.

Whether an employee is legally entitled to receive their bonus upon termination of their contract of employment depends upon three issues: firstly, the date on which it would normally be decided whether the employee would be entitled to receive a bonus for the particular financial year (“the Bonus Decision Date”); secondly, whether the termination date of the employee’s employment (“the Termination Date”) falls before or after the Bonus Decision Date; and, thirdly, what the contractual terms of the bonus are (e.g. whether the bonus is mandatory or discretionary, whether there has been a custom and practice of paying bonuses and, if so, how much has generally been paid etc.).

The employee will first have to determine what their usual Bonus Decision Date. Once the employee has done so, if the Bonus Decision Date falls on or before the Termination Date then it is generally possible to argue that the employee should be paid a bonus (the situation becomes slightly more complex if the employee is being paid in lieu of notice – in this circumstance whether the employee is entitled to a bonus payment will depend on whether there is a payment in lieu of notice clause (“PILON clause”) in the employee’s contract of employment and, if so, what the terms of that PILON clause are); if the Termination Date falls before the usual Bonus Decision Date then it is generally not possible to cogently argue that the employee should receive a bonus under the settlement agreement.

If the Termination Date does fall on or after the Bonus Decision Date then whether the employee is entitled to a bonus under their settlement agreement will depend upon a variety of factors, including (among others):

  1. Whether the employee’s entitlement to a bonus is discretionary or absolute (normally the employee’s entitlement to a bonus is discretionary in respect of whether the employee should receive a bonus and, if so, how much)
  2. Whether there has been a custom and practice of paying bonuses during the employee’s employment; and
  3. Whether there has been a custom and practice of paying bonuses in cases where an employee leaves under the terms of a settlement agreement

The employee should carefully check their contractual documents (or get their lawyer to check them) to determine whether there is a bonus clause and, if so, what the terms of that bonus clause are. The employee should also create a chronology of when they have received bonuses in the past and how much they have tended to receive. If possible (and being careful not to contravene the terms of any settlement agreement the employee may have been offered) the employee may wish to try and see what departing employees leaving under settlement agreements have been offered in respect of their bonuses (it can be difficult to determine this, though, as other (ex-)employees may be reluctant to be forthcoming about the terms of their settlement agreement for a variety of reasons).

If you believe that you should be receiving a bonus under your settlement agreement then it is advisable to ask your lawyer to check this for you and, if appropriate, return to your employer to negotiate this for you.

About Chris Hadrill

Chris is a specialist employment lawyer at Redmans. He specialises in contentious and non-contentious employment matters, including breach of contract claims, compromise agreements and Employment Tribunal cases. He writes on employment law matters on a variety of websites, including Direct 2 Lawyers, Lawontheweb.co.uk, LegalVoice, the Justice Gap and his own blog.

Contact Chris by emailing him at chadrill@redmans.co.uk

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One Response to Question: should I receive a bonus payment under my settlement agreement?

  1. […] The issue of bonus payments under settlement agreements is also covered in this article. […]

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Testimonials

4.52 Average

21 Reviews

Redman's provided excellent legal employment advice for me during a difficult time in my employment. Chris was my lawyer, super efficient, quick, reliable and clearly very experienced in the matter. Could not ask for a better law firm to deal with your query if you are in need of some help. Would definitely use them again in the future. Highly recommending Chris.

Posted 3 weeks ago

Steven

Chris Hadrill was very professional and responsive. I would highly recommend him

Posted 4 weeks ago

Dinah

Very Efficient, with very quick email reply’s. I had a matter that needed resolving within a very short space of time and Redmans Solicitors were great with dealing with my matter quickly.

Posted 4 weeks ago

Ankar

At Redmans the solicitor that was dealing with me was Chris. He dealt with my situation smoothly with clear guidance and explanation

Posted 1 month ago

Anonymous

Clear, concise advice and guidance delivered by an experienced and very capable solicitor, within the timelines required

Posted 1 month ago

Anonymous

Very efficient service. I never had to wIt for more than a day for a reply to any of my queries and the matter was dealt with swiftly.

Posted 1 month ago

Anonymous

Very timely, thorough and helpful advice. Friendly and considerate of the needs of the client

Posted 1 month ago

Anonymous

Very prompt and attention to detail. Thank you for the service

Posted 1 month ago

Chris

Couldn’t be happier with how Redmans successfully handled our seemingly tricky case. By being clear and detailed every step of the way, with the utmost professionalism and courtesy, they made it an informative and eye-opening process, taking the stress out of the situation and ultimately delivered what you would want from such a service. I fully appreciate everything they have done, and if I am ever in need of such services in the future, they will be the first number I contact. Excellent.

Posted 1 month ago

Anonymous

Excellent work delivered with great quality

Posted 1 month ago

Dominic

Chris Hadrill was a great help both in terms of his advice and his expertise. He explained my options to me clearly and concisely enabling me to quickly make the right decision for me in the circumstance. I would not hesitate to recommend Chris or Redmans to friends or colleagues, and would certainly make Redmans my first port of call should I require a similar service in the future.

Posted 1 month ago

Kurt

Redmans gave excellent advice and helped me understand everything in clear concepts. Thank you!

Posted 1 month ago

Anonymous

Resolved my issues

Posted 1 month ago

Keith

Quick fast professional service.

Posted 1 month ago

Michael

"Prompt, efficient and practical advice that resulted in me getting some additional money tax free."

Posted 1 month ago

Anonymous

Patient and thorough advice given to me around my Settlement Agreement

Posted 2 months ago

Anonymous

"Excellent service, getting back to you promptly giving you very good advice."

Posted 2 months ago

Anonymous

I found Chris Hadrill to be an excellent help, he is very knowledgeable and gives good ,concise ,strategic advice .He makes himself readily accessible when you need him.I would personally highly recommend him.

Posted 2 months ago

Christine

Professional, efficient and reliable service provided. I strongly recommend them and I would use this service again.

Posted 2 months ago