As companies are finding it increasingly hard to survive in this harsh economic climate and the announcement of further cuts in the recent budget the issue of a Christmas bonus is one which employers find themselves having to consider more than ever. During the economic boom most employers gave employees Christmas bonuses every year religiously. This was in order to boost morale amongst staff and motivate them to increase their productivity into the next year. However, this yearly practice from employers may now start to back fire as employees now see this yearly Christmas bonus as a right and not a gift or a goodwill gesture.
One such employer experiencing this “back fire” is a well know company; the Building Society EBS Limited. The Building Society has announced that staff will not receive their traditional extra month’s salary with their December pay and news reports have now suggested that lower ranked staff in EBS are preparing to strike throughout Christmas week. A six day ballot is now taking place and the vote counting is to take place on the 13th December 2011. The outcome of this ballot is expected to serve the company with notice of strike action which should commence on the 29th December 2011.
If employers find themselves not being able to afford to give employees a Christmas bonus this year they will need to consider the consequences that may be attached with this decision. In order for an employer to reserve that right not to offer a Christmas bonus this year it must be contained in the employee’s terms and conditions of employment that any Christmas bonus issued is strictly at the discretion of the company. However, what happens if an employer has been paying the Christmas bonus every year for a number of years; is it then classed as an implied term of the employees terms and conditions of employment?
This is something that can be argued very easily by the employee. The employee could in fact go in front of an employment tribunal and argue that an entitlement to a Christmas bonus is an implied term of their employment and the custom and practice of paying the bonus over a number of years has established that this Christmas bonus should be paid in the current year by way of an implied contractual entitlement. In order to defend such a case an employer would need to be able to show a copy of the terms of employment or some written instruction which states that payment of the Christmas bonus is at the employer’s discretion and also be able to give strong justification as to why the company was not in a position to pay the bonus i.e. financial position of the company.
It is impossible to state if the employer or the employee would be successful and it would be a decision for the Tribunal officer on the day to make based on the evidence provided by both the employer and the employee. However, if you take into account recent decisions published it shows a worrying trend in favor of the employee. If the employee was successful the maximum award would be that the employer would be ordered to pay the Christmas bonus that the employee would have received.
Therefore, employers must be aware that if you are considering not giving employees a Christmas bonus this year you may be running the risk that if the employee pursued a claim through the Labor Courts then you may be ordered to pay this bonus back to the employee.
