21st December 2021

Employment Law Advent Calendar: Day 21

It’s the 21st December and do you know what Santa’s little helpers learn at school? The elf-abet of course! Take a look behind door number 21 to find out who or what is there to help employers have a be-yule-tiful Christmas.

It’s a Christmas money wallet

For many this year, business has been difficult or slow and some employers that normally give their employees Christmas bonuses may be thinking about not paying one. Will those employers be at risk of claims?

Is there a contractual entitlement to a bonus?

It’s important to first establish whether or not employees have a contractual right to be paid bonuses. If their contracts state there is a right to a Christmas bonus at a specific amount it must be paid, otherwise it will be a breach of contract. If criteria must be met before any contractual bonus is paid, the criteria must not be discriminatory. For example, the requirement for a good absence record may discriminate against an employee who has had disability-related absences.

If their contracts don’t mention a bonus, there could be a contractual entitlement if bonuses have previously been paid and it has become custom and practice to do so, or if it is referred to in another document which has been incorporated by reference into the contract. If either of these scenarios apply, it is worth taking advice before deciding whether or not to pay a bonus.

What is a discretionary bonus?

If the contracts provide for a bonus but don’t say anything about specific targets or set out what the bonus is based on, it may be possible to exercise some discretion as to how much is paid. Or the contracts may not provide for a bonus and there will be discretion in terms of whether or not to pay, and how much to pay. However, employers must act reasonably and be careful not to discriminate, for example, by paying bonuses to one person or group and not another, or paying more to, say, men than women. 

Top 3 tips for employers  

  1. Review contracts, previous practices and any separate policy to establish whether or not employees have a contractual right to a Christmas bonus.
  2. If exercising a discretion to withhold a discretionary Christmas bonus avoid acting irrationally or perversely in doing so, and always check any decision is not discriminatory.
  3. Speak to the workforce and explain why bonuses are not being paid, or are only being paid to certain staff.

Make sure you elf a merry little Christmas and contact a member of the Blackadders Employment Team working in Aberdeen, Dundee, Edinburgh, Glasgow, Perth and across Scotland for help and advice.

Donna Reynolds, Partner
Accredited by the Law Society of Scotland as a Specialist in Employment Law & Discrimination Law
Employment Law
Blackadders LLP


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