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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?

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Testimonials

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164 Reviews

Samantha K

Absolutely brilliant thank you. Caroline Lewis is a legend

Posted 2 weeks ago

Anonymous

The legal advice was clear and helpful.

Posted 2 weeks ago

Davinder P

Good Service

Posted 2 weeks ago

Adrian V

I was using Redmans services for a Settlement Agreement. Very quick and professional service. The outcome was favourable and I was very pleased with the amendments and results. Pretty glad to recommend them for any type of legal advice.

Posted 2 weeks ago

Anonymous

Very responsive, efficient, clear and supportive. Thank you! Highly recommend.

Posted 2 weeks ago

Tiago S

Chris was always prompt to help me with legal matters that are beyond my comprehension and very helpful leasing with my former employer. I would recommend Redmans Solicitors to everyone who needs help.

Posted 2 weeks ago

Anonymous

Fast and professional advice tailored to what was needed. Thanks for your help Chris Hadrill and team.

Posted 2 weeks ago

Peter S

Really pleased with the outcome and the advice I had from Chris and Sacha.

Posted 3 weeks ago

Harika A

Redmans solicitor's helped me with my settlement agreement, Chris has been very helpful throughout the process.He was very prompt in his responses and made my settlement look simple.Special thanks to Caroline for her efficient communication, thorough explaination of contract terminology and negotiations.I highly reccommend Redmans solicitors for anyone seeking employment related legal help.

Posted 3 weeks ago

Anonymous

Good and quick service

Posted 3 weeks ago

Ricky D

Very satisfying to be assured of such attention and professionalism.

Posted 3 weeks ago

Anonymous

Excellent service - thankyou

Posted 3 weeks ago

Anonymous

Efficient, timely and friendly support and advice

Posted 3 weeks ago

Ahmed S

They are always on hand when you need them and provide support even when its not necessary.

Posted 3 weeks ago

Nemen S

Wonderful experience.Chris was very responsive and provided an excellent service. A real professional who I would recommend to anyone

Posted 3 weeks ago

Anonymous

Their guidance was clear and they provided me with all the information I required. Friendly yet professional

Posted 3 weeks ago

Anonymous

Chris @ Redmans assisted me with an employment issue. Firstly, he was very proactive in coming back to my initial enquiry and then helped to clearly lay out the options that I had in relation to my position. He then assisted with the preparation of my case, which led to a very satisfactory outcome. I would highly recommend the quality of service & professionalism offered by Redmans Solicitors.

Posted 4 weeks ago

Anonymous

Great service

Posted 4 weeks ago

Anonymous

Chris was very effective and decisive in dealing with my matter. I felt guided, and the pressure to make decisions was taken off my shoulders; he knew what needed to be done and I was happy to follow his advice. The result of the legal dispute was a great success for me. He is also kind and personable. The only thing that I would say it could be improved, is the accuracy of cost estimation at the beginning: not many activites, that could not have been forseen had to take place, but costs went up more than double in the end. Overall very good and trustworthy. I would definately recommend and use Redmans services again.

Posted 4 weeks ago

Liz P

An excellent professional service was provided by Chris Hadrill and Mel Chin. Efficient and trustworthy - would highly recommend this company.

Posted 1 month ago

Anonymous

Redmans Solicitors were great. They were able to advice me quickly and efficiently! I would recommend them, as a good solicitors to use.

Posted 1 month ago