Santa or Scrooge: Employee Bonuses and Gifts

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By Nikita Barsby, Senior Associate and Gemma Little, Lawyer

As the year draws to a close, employers may choose to give employees bonuses, gift cards or something similar, usually as a way of recognising the past year’s work and achievements.  While this practice is often positive in that it can increase morale and motivation, employers should ensure appropriate policies and procedures are in place to prevent well-meaning gifts from becoming gremlins.

Ensure discretion

Often employers will want to ensure that end of year bonuses or gifts are discretionary, and not a contractual entitlement.

One way to do this is to have a policy addressing bonuses and gifts, the specific detail of which will vary between organisations, but which in any event states that such bonuses/gifts are given entirely at the employer’s discretion.

The policy should be coupled with clauses in employees’ contracts which expressly state that the employer’s policies do not form part of the employment contract.

Depending on matters such as the size and nature of the organisation, bonus/gift policies may also address:

  • any criteria to be met before a bonus or gift may be given;
  • whether bonuses and gifts are given to departing employees – for example, whether an employee who has or is resigning may receive a bonus;
  • any monetary caps on bonuses or gifts; and
  • internal procedures to be followed to authorise a bonus or gift.

Avoid discriminatory criteria

To the extent that discretionary bonuses or gifts will be linked to the achievement of specified criteria, employers should ensure that these are not discriminatory – directly or indirectly.

For example, if an employee is required to make a specified number of sales in the year to be eligible for a discretionary bonus, but the employee does not reach that number of sales because she was on maternity leave for part of the year, this criterion may be indirectly discriminatory.

To address this, the employer could consider a pro-rated equivalent target for an employee who has been on a period of authorised leave.

Confidentiality

Where varying bonuses will be given to different employees, employers should consider directing recipients to maintain confidentiality around their receipt of/the amount of any bonus.  This will limit the risk of well-meaning bonus payments negatively impacting staff morale in circumstances where some employees may receive larger bonuses than others.

MDC Legal’s 12 days of Christmas blog series addresses a variety of issues that may arise for both employees and employers throughout the festive season.  MDC Legal are employment law specialists assisting employees, employers and industrial organisations – giving us a unique and comprehensive insight into employment law issues.