TUPE & Discretionary benefits

InsideInsurance

Its water under the bridge and I personally wasn't impacted by it but am slightly curious of what the legalities were....

Company A Plc owns 100% of Company B Ltd. Staff working for Company B have contracts in the name of Company B Ltd

Company B Ltd decides to buy out Company Z Ltd as a going concern and therefore TUPE applies.

It is then decided to offer all staff formerly of Company B Ltd and Company Z Ltd new contracts in the name of Company A Plc.

For employees formerly of Company B Ltd the changes are minimal and for most probably beneficial.

For employees formerly of Company Z Ltd the changes are very significant and for some beneficial for other negative.

Company Z's employee contracts however had a significant amount of benefits/ bonuses as discretionary rather than mandated. During the consultation process of switching contracts it is hinted at, but not stated or written anywhere, that all discretionary benefits/ bonuses would be decided to not be awarded.

So as an example a former employee of Z would sacrifice a discretionary bonus of up to 20% for a non-discretionary bonus of 10% if they switched contracts or basically get no bonus if they stayed on their old contract.

Would this sort of activity be considered legal?

I personally wasn't impacted as I worked for B prior to the acquisition and benefited from the switch to the new contract wordings.

SarEl

Yes - the exercise of discretion is discretionary! If there is no entitlement then management - whoever management are - can simply decide not to pay a discretionary bonus.

DVardysShadow

InsideInsurance wrote: »

...

So as an example a former employee of Z would sacrifice a discretionary bonus of up to 20% for a non-discretionary bonus of 10% if they switched contracts or basically get no bonus if they stayed on their old contract.

As it is company A which will now set the discretionary bonus, you have to think of the possibility of a discretionary bonus of 0%.

Mr_Falling_Star

Isn't there a a claim under "custom and practice" here, if a bonus has been paid out for the last few years should it not be paid again for company Z employees?

DVardysShadow

Mr_Falling_Star wrote: »

Isn't there a a claim under "custom and practice" here, if a bonus has been paid out for the last few years should it not be paid again for company Z employees?

Absolutely. However, custom and practice determines that a discretionary bonus be paid. This is where the problem arises. Custom and practice will not extend to setting the level of a discretionary bonus.

Taking it on its own, 10% fixed looks like a good offer to buy out the bonus.