Definition
A bonus is an additional variable payment on top of the fixed salary, which depends on performance, the achievement of targets or the company’s success. Whether there is a legal entitlement to it depends on whether the payment was bindingly promised or expressly stated to be voluntary. Reservations regarding voluntary nature and revocation must be clearly worded – unclear clauses are to the employer’s detriment. If the employer determines the amount at their own discretion, they must exercise this discretion fairly; excessive reductions may be subject to judicial review.
Specialist solicitor in employment law
With over 15 years’ experience in employment law
Classification under employment law
Bonuses and incentives are often described as voluntary benefits. However, it is not the description that is decisive, but the actual content of the arrangement. Even supposedly voluntary payments can become an enforceable entitlement – for example, through established company practice or implied promise.
Distinction from related terms
Bonus / variable remuneration: Bonuses are usually linked to specific performance or events. Bonus payments can be broader in scope and also take company-wide targets into account.
Gratuity: Gratuities are often paid regardless of individual performance, for example on specific occasions. Premiums, on the other hand, usually require a specific performance or the achievement of a target.
Practical tip
Has your employer promised you a bonus verbally or confirmed it in an email? Make sure you keep a record of this communication. Verbal promises are generally valid under employment law – but proving them is the problem. Putting things in writing offers protection.
