Our reader this week feels that she is fighting a losing battle with her employer over the non-payment of annual bonuses.
Since joining the company four years ago, the employee has always received a bonus in December. However, staff were told several months ago that no bonuses would be paid at the end of this year and no reasons were given for the decision.
Our reader says that this is unfair, as she has “come to expect” the bonus as a reward for hard work throughout the year. She would therefore like to know what the Labour Law states about payment and non-payment of bonuses.
In fact, the Labour Law is silent on this question.
Payment or non-payment of bonuses is at the employer’s discretion. Should an employer choose not to give bonuses, he or she may not be accused of unfair labour practice.
In our reader’s case, her employer is not obligated to continue giving staff bonuses, especially in light of the current economic climate in South Africa. I actually feel that he has been fair and has foresight, since he informed staff six months before Christmas.
An employee should study his or her contract of employment. If it states that a 13th cheque will be paid annually, only then is an employer obligated to pay the stipulated amount.
In terms of bonuses, the most common types are Christmas, performance and production bonuses.
The Christmas bonus – or 13th cheque – is usually classed as a gratuity or gift of gratitude in recognition of a job well done, or as a “thank you” for going the extra mile.
However, most employees have come to expect this payment as a right, entitlement or necessary condition of employment.
At job interviews, it’s common for applicants to ask: “Do you pay a 13th cheque?” This clearly shows that they expect the bonus, regardless of job performance.
Employers must clarify this from the outset.
Many companies now incorporate the traditional 13th cheque into an employee’s basic salary or, following a bad trading year, may be unable to pay the bonus, as our reader’s boss has indicated.
An employer may argue that he or she cannot know months in advance if bonuses are payable or not; however, any employer should have some idea of year-end profits by mid-year.
A performance bonus is normally for consistently good performance that exceeds company standards and is usually calculated on a percentage of the employee’s salary or wages. A performance bonus can also be paid as a lump sum to a department, or split up in equal amounts to each employee in that department.
Whatever the case, the method of calculation must be fair and equitable.
A production bonus is based not on performance measured against company standards, but rather on production measured against targets. Measurement is also based on quality of production.
In summary, employers do not have to pay annual bonuses and may implement this decision after negotiations, even if some employees do not agree to it.
Of course, a few disgruntled staff members may proceed with a claim of unfair labour practice, but they will be unsuccessful.
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Booysen & Rossouw Attorneys in Port Elizabeth specialises in labour related legislation. The firm also covers injury on duty cases as well as all other aspects of the law.
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