How Christmas bonuses can turn into a festive disaster

As we gallop, reindeer like, towards Christmas, thoughts will be turning to the gesture of “measured generosity” that is the discretionary Christmas bonus. It should be uncontroversial: a mark of appreciation that will help staff pay for their retail pleasures over the festive season. If employers get it wrong, however, they could face expensive claims from their employees. So what are the common issues and pitfalls associated with the awarding of Christmas bonuses?

 

Assume sales managers Susan and Bill work in the same role for a national Christmas tree distributor and have both exceeded their sales targets. Susan has exceeded her target by 5 per cent and Bill has come a close second at 4.5 per cent. “All bonuses are discretionary”, the company says in its staff handbook. And Bill cannot contain his glee and emails Susan before their company Christmas party expressing his excitement that he has just been given a bonus of £1,000. It turns out that Susan was awarded less (£700). She is miffed: she does the same job as Bill and her sales target excess was greater than his was.

 

Susan should, in the first instance, informally ask her employer why her bonus was smaller. If she gets the brush off, she is best advised to make the query formal and make a data subject access request under the Data Protection Act 1998 for personal data that her employer holds about her. In this way, she can see how her bonus was considered by senior management. She would need to make the request in writing and pay a £10 fee to get the request acted upon and, if it is not, she must complain to the Information Commissioner. This may uncover any evidence of unequal treatment.

Susan may be disgruntled anyway and this inequality of bonus issue could be the last straw. Giving her a smaller bonus could amount to a fundamental breach of an unwritten term of her employment contract that demands that her employer must not act in a way that is calculated to recklessly destroy the relationship of mutual trust confidence. If she relies on this last straw breach of contract, she will have to act quickly, once she has pocketed the £700 less tax, by resigning and claiming “constructive (unfair) dismissal”. She would need to raise a formal grievance first, as if she fails to raise a grievance under the ACAS Code of Practice on Grievances, she could face a 25 per cent reduction in any compensation awarded to her by an Employment Tribunal. The maximum compensatory award for constructive dismissal is £78,335 or 12 months loss of earnings, whichever is less.

 

Since Susan’s sales performance was better than Bill’s, she could complain that there has been inequality on the grounds of her sex or possibly age if Bill is younger or older than her and his bonus has been decided on age-related grounds. She has three months from the payment of the bonus to bring a claim of direct discrimination. Compensation would cover the bonus that she should have received plus compensation for injured feelings.

 

Employers should check whether bonuses are covered in their employees’ contracts. If so, even if they are referred to as discretionary, discretion is no substitute for uneven handedness. Consistency is everything in life, from your Christmas cake mix to bonus awards.