Drafting Bonus Terms

Each employer approaches reward differently.  No bonus scheme is alike and David is highly experienced in drafting Bonus Terms in advising on possible bonus structures and drafting them into employment contracts or as separate stand-alone documents.

Choices include whether to have a contractual or discretionary bonus or a mixture of the two.  Careful legal drafting is needed to avoid unwanted claims for contractual bonus entitlements.  Understanding the limits on the use of discretion in the awarding of bonuses, the language used in communications around possible bonus payouts and how historical awards using the same formula or amounts are all important.

Some business like to reserve maximum flexibility and David can help draft bonus schemes which are discretionary or where the employer is happy to commit for one bonus year but wants to be able to amend the scheme rules annually.

David can also advise on the merits of claims for bonuses by employees unhappy with their awards.

Bonus schemes can also we used as a retention tool by rewarding the employee for their hard work but by making part of the bonus award payable over time vesting perhaps annually.  In this way the employee will hopefully want to wait to receive the next tranche of bonus payment earned and due each year and the promise of more to come may hold them into the business and put them off being tempted by offers of employment elsewhere.  Some employers will be willing to pay a potential hire for their loss of accrued bonus lost in leaving to join them.

If you need help with any bonus issue please contact David Greenhalgh on 020 3603 2177.