With one or two notable exceptions, the majority of firm bonus pots have increased this year, although some 45% of bankers are said to be dissatisfied with their payouts.
The question specialist employment lawyers are often asked by City professionals is whether there is anything that can be done about challenging the size of a payout award. The complaint 'my bonus isn’t big enough' might not be the most populist statement to make at the moment, but as there are no formal courts of public opinion - only courts of law - it may be helpful to understand the true legal position.
Most people are familiar with the concept of guaranteed and discretionary bonuses - with it being a far easier matter to challenge a failure to pay out on a guaranteed bonus, such as a ‘golden handshake’ from a new employer. A common misconception, however, is that discretionary bonuses cannot be challenged at all, since they are at the discretion of the employer.
In reality, there is no such thing as a purely ‘discretionary’ bonus, granted at a whim. An employee is entitled to expect the employer to undertake the exercise of discretion, and not to do so in a way which is irrational or perverse. This applies both to the decision to award a bonus, and to the question of how much to award.
Like so many things, the devil is in the detail, and so what the bonus scheme actually says about the relevant performance factors will be key. Other considerations are likely to include the performance of the team or business as a whole, individual performance, how others in a similar position are treated, as well as industry custom and practice.
Another important issue is where a nil or reduced bonus comes about because of a discriminatory factor; either owing to direct prejudice on grounds of an employee’s race, sex, disability, age, sexual orientation, religion or belief, or because the criteria used to determine the bonus indirectly discriminated against individuals on one of these grounds, for example, where a woman is paid less by way of bonus because she works from home one day per week.
It is also worth noting that if an employer has had a recent change of heart, for example banks that have decided it is expedient to make bold public statements about cutting their bonus pools, then the situation may, in some circumstances, give rise to a breach of contract claim. Written evidence on this, however, will be very important, and for this reason informal ‘assurances’ about intended or likely bonus payouts are harder to support.
The reality is that challenging bonuses is rarely straightforward, but it can be done and it will often make financial sense to at least consider. The first step is usually to request an explanation from the employer as to how the bonus figure has been arrived at. A written response should help an employee decide if pursuing the matter further is a viable option.
Samantha Mangwana, Russell Jones & Walker