Providing staff members with a contract of employment is not only a legal obligation for employers, up-to-date HR documentation can protect your business from time-consuming and expensive employment law claims.
Alan Hickey, Head of Legal and Service with Peninsula Ireland, offers his expert advice on a recent Labour Court ruling which highlighted the importance of clear, well-written policies in the terms of employment that you share with employees.
The Labour Court has determined in Bord Gáis Energy Ltd -v- Thomas (PWD1729) that an employee was not entitled to be paid a bonus because the company bonus rules required employees to be employed at the time the bonus was due to be paid, whereas as the employee had already left the company before the due payment date.
Whilst the above point may seem obvious (i.e. why would you pay someone a bonus ‘after’ they left) it is an important decision as this matter is disputed by employers and employees more frequently than you would think.
For example:
• A company has a bonus scheme for employees which is based on the company’s annual performance from January to December. The bonus is paid every year in February based on the previous year’s results. An employee works from January 2017 to December 2017, and he really contributed to the company’s good results, but resigns and leaves the company in January 2018. The employee feels they should be paid the bonus in February 2018 given their contribution to the cause.
• Another example is an employee who works in sales. The employee earns a commission on all sales they generate but only after the employer has received a certain amount of revenue from the sale. This means that commission might be paid a number of months after the actual sale occurs. The employee resigns and wants to be paid all their outstanding commission, including those that are due to be paid after their end date.
The Importance of a Well Written Policy
This Labour Court decision is very important as it emphasises the importance of a clearly written policy when it comes to bonus payments etc. The Labour Court concluded that the employee wasn’t entitled to the bonus and in doing so based its decision entirely on the fact that the company policy specifically required the employee to still be employed in order to be entitled to the bonus.
Therefore, if the policy was vague or unclear on this point, the employee may very well have been entitled to the bonus even though it wasn’t due to be paid until after his employment had ended.
The Labour Court stated that in order for an employee to claim that monies have been unlawfully deducted, it must be established if those monies were “properly payable” to them under their contract of employment and concluded as follows:
“The question that arises is whether, or not the [bonus] payment was properly payable to the complainant. In considering that question the Court places considerable weight on the fact that the complainant’s contract sets out the eligibility requirements for payment of the [bonus] and that the Complainant confirmed in evidence that he was aware that one of the criteria of the scheme required that he be in employment on the date of payment. In all the circumstances of this case and on the evidence before it, the Court is satisfied that the Complainant did not meet the criteria to be eligible for a payment under the scheme. Therefore, the bonus arising from the scheme was not “properly payable” and no contravention of the Act occurred.”
If you have any questions in relation to company policies, employee bonuses or any of the topics covered in this article please contact our expert employment law advisors on the 24 Hour Advice Service on 0818 923 923
