Bonus scheme operating after dismissal

Posted by admin at 15:51 on 13 Feb 2017

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The High Court recently heard a case regarding a discretionary bonus for a former employee. The Court held that when an employee is no longer employed by the Company, it is not implied that the former employee is not entitled to a discretionary bonus.

The bonus in question was part of the company's discretionary bonus scheme and had been left unpaid due to poor performance and the fact that the employee had been given a summary dismissal. The Courts favoured the former employee ruling that the individual was entitled to the bonus he would have received had he still been employed even though he had left the company at the time of distribution.

The Defendant claimed that there was an implied term that a bonus is not to be paid to an individual who is under a notice of termination at the date of award. The court rejected this on the grounds that it did not work parallel to the basic requirements of implied terms of a contract.

The courts also rejected the claim that the bonus was withheld due to poor performance.

Employee share schemes, such as, the Enterprise Management Incentive (EMI) and the Company Share Option Plan (CSOP) can be a very useful way to by-pass issues like this that can arise when dealing with bonus schemes and performance related commission.

To find out the most effective and tax efficient way to incentivise your employees speak to one of our experts today on 020 8949 5522.