Bonuses are not a statutory requirement in terms of the labour law, and any bonuses that are paid, are not regulated by labour legislation unless part of a collective agreement concluded in a Bargaining Council; it is therefore a contractual issue.

There are various types of bonuses found in the workplace, some if these are:

  1. Annual bonuses or 13th cheques; These are bonuses paid on an annual basis, where it is either stipulated in the employment contract, or where a right of expectation has been created. These are usually fixed amounts or percentages.
  2. Performance Bonuses; These are based on the employee’s performance, and would require the employer to make use of objective performance criteria and standards against which the employee’s performance is measured.
  3. Production bonuses; These are based on prescribed targets being met by employees and/or departments.
  4. Attendance Bonuses; These are based on employee’s level of attendance at work during the year (i.e. where late coming and absenteeism is below a target).

Employers may have a clause in their contracts that say annual bonuses are given at the sole discretion of management and that they are based on the performance of the company and the performance of the employee; but in truth, this does not absolve the employer from following an equitable and objective exercising of their “sole discretion”.

If the employer tends to pay bonuses each year, or at least has done so for the last 2 plus years, then you may find that they have created the expectation in the employee’s mind, and it may then be “unfair” to withhold bonuses without following certain procedures and communicating openly with the staff in advance.

When an employer decides that bonuses will be paid to staff, and they do not do a fixed bonus, or a fixed percentage of the employee’s remuneration, but rather pay differing bonuses per the person and the position they hold, then the employer should be able to motivate their decision with objective criteria against which each person is measured or on which the bonus is based. Without this, it may be an unfair labour practice or even discrimination.

In summary, discretionary bonuses should be carefully constructed to reduce the risk of any unfair labour practice challenges by ensuring they are based on objective criteria.

By Andrea Grant-Smith

DETERMINING ANNUAL BONUSES EQUITABLY
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