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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

4.68 Average

69 Reviews

Anonymous

The guidance and assistance I recently received when using Redman's was fantastic. Caroline & Chris were both very informative and understanding walking me through each step. Thank you.

Posted 1 day ago

Nicola W

Fantastic service, very quick and efficient. Thank you

Posted 1 day ago

Anonymous

Excellent professional service.

Posted 1 day ago

Anonymous

As with All solicitors advice without consequence but understood and communicated my legal position

Posted 1 week ago

Anonymous

Prompt, professional and excellent service.

Posted 1 week ago

Dominic C

Excellent service, prompt and helpful

Posted 2 weeks ago

Anonymous

I found Redman’s to be very efficient and got me the best deal available in the short time scale that was available.

Posted 2 weeks ago

Victor L

Very professional. Provided excellent advice on my Settlement agreement.

Posted 2 weeks ago

Anonymous

Professional from start to finish.

Posted 2 weeks ago

Oliver W

Excellent service provided by Redmans, will certainly consider using again.

Posted 2 weeks ago

Melanie H

Very professional and extremely personable service. Thank you very much.

Posted 1 month ago

Anonymous

I found Chris to be very approachable and easy to speak with about complex matters. He took action quickly and his updates to me, as his client, were prompt. I would recommend Chris and the team at Redmans without hesitation.

Posted 1 month ago

Anonymous

Good advice

Posted 1 month ago

Anonymous

Overall happy with the service provided by Chris and Rana.

Posted 1 month ago

Anonymous

Chris and Rana provide a great service, very informed, diligent and care about your result, would recommend Redmans

Posted 1 month ago

David W

A speedy efficient friendly service, I would definitely recommend Redmans Solicitors for processing Settlement Agreements.

Posted 1 month ago

Anonymous

Both Rana and Chris were fantastic. From the first phone call I was confident my matter was in good hands. I was not disappointed. I would highly recommend Redmans. Thank you again for all of your support and advice.

Posted 1 month ago

Federico S

Great advices and communication. Through Redmana I obtained match more than what I thought. Highly recommended

Posted 1 month ago

Tom G

A good and efficient service with the required legal advice provided for a settlement agreement.

Posted 1 month ago

Francis T

The solicitor I used was Chris Hadrill, who I found extremely professional and I felt that he made me feel at ease, considering the subject matter he was assisting me with.

Posted 1 month ago

Anonymous

Chris provided excellent assistance with the negotiation of my settlement agreement. From start to finish, I was consitently updated and advised on the best course of action to take. I would highly recommend Chris and Redmans Solicitors.

Posted 1 month ago