Employee Bonuses – A Commitment is a Commitment

When it comes to bonuses, commitments made to employees must be honoured. An Employment Tribunal (ET) made that point in coming to the aid of a salesman whose employer prevaricated on its obligation to reward him with a six-figure sum following his successful closure of a multi-million-pound deal.

The software salesman and his team spent many months negotiating the deal. His line manager later assured him that he would receive an exceptional six-figure bonus to mark his success and that the payment had been approved at the highest level. Very soon afterwards, however, his employer underwent a restructuring and the make-up of its senior management team changed significantly.

Only a third of the promised bonus appeared on his payslip following the employer’s receipt of its first payment under the deal and he was informed that payment of the balance would be deferred until a later date. He responded by lodging a grievance and set a deadline for payment of the entire bonus. After that deadline came and went, he resigned and launched ET proceedings alleging constructive unfair dismissal.

Upholding his claim, the ET found that he had every reason to believe that his bonus had been signed off, ultimately by his employer’s then CEO, who left the company shortly afterwards. A binding commitment to pay him the bonus had been made and the ET observed that, if he could not trust his managers to give him accurate information, then whom could he trust?

The ET found that, following the restructuring, the employer had first prevaricated and then reneged on the bonus commitment. It was not open to the employer to unilaterally re-decide the terms on which the bonus would be paid simply because it did not like how much money it would have to pay him.

The employer had no reasonable or proper cause for failing to pay him the bonus as agreed, and his grievance was not dealt with in a satisfactory manner. When the deadline passed, he was entitled to resign on the basis that there had been a fundamental breach of his employment contract. If not agreed, the amount of his compensation would be assessed at a further hearing.