Discretionary bonuses and resigning

Mistermeaner

Hi after a bit of advice

My situation is this : I am employed and my contract requires i give 3 months notice for resigning 
Each year my company pays a discretionary bonus based primarily on business performance - I'm relatively senior and the house has consistently been 20k+ 
What normally happens is i (and others at my level) get a letter in late March advising of pay review to apply from April (typically an inflationary rise + a couple of % based on individuals performance rating) and also advising bonus amount payable on 25th April related to business performance in the prior year
I'm thinking of resigning to take a job elsewhere and wondering what the company can and can't do regard my bonus
As it's discretionary i guess if I handed my notice in today no letter will arrive and hence no bonus even though I'll still be there 25th april  ?

What im most curious about is it i was to wait for the march letter that states bonus xx will be paid 25th Apr and then hand in my notice on e.g. 1st Apr can they withhold my bonus at that point ?

middleclassbutpoor

Its discretionary so expect that if they know you are resigning they can withhold this unless there is anything within your contract or company policies to state otherwise.  The safest way to guarantee your bonus is resign once it's in the bank.

If you have an alternate offer elsewhere, you could try and see if they can offer a golden handshake, which can be more common at board level type roles and negotiated but may not be an option. 

If you can't stand the thought of waiting for the bonus payment date plus 3 months then you should consider whether its worth sacrificing your bonus to be happy.  

Undervalued

middleclassbutpoor said:

Its discretionary so expect that if they know you are resigning they can withhold this unless there is anything within your contract or company policies to state otherwise.  The safest way to guarantee your bonus is resign once it's in the bank.

If you have an alternate offer elsewhere, you could try and see if they can offer a golden handshake, which can be more common at board level type roles and negotiated but may not be an option. 

If you can't stand the thought of waiting for the bonus payment date plus 3 months then you should consider whether its worth sacrificing your bonus to be happy.  

Quite.
Even if there was an argument to be made that, at a certain point, they would be legally obliged to pay the bonus (and I think you would struggle to find one) what happens if they don't pay it? Your only options would be to go without or sue them. Is that a route you really want to go down?

Arguably a bonus is as much an incentive to work hard next year as it is a reward for what you have done so far.

Legally, discretion is fairly wide, all the law requires is that it is not exercised "perversely".

ratechaser

I've worked for over 20 years in an industry where the discretionary bonus is an ingrained and endemic part of the culture.

And the number 1 golden rule that everyone, EVERYONE, knows is that you do not, ever, resign before the money is in the bank. Enough said...

Mistermeaner

Thanks for input ; clearly waiting until money in the bank is the safest option but that would mean not putting in my 3 months for another 2 months (so 5 months total for potential new employer) - I will of discuss this but would understand they might think this a little long

Will also check prior communications regards the bonus - I'm fairly sure there's nothing in my contract but there is an old employee handbook that might have something in

There has also been a number of separate comms as the measures etc have changed over time

Be very interested in the legal angles of there is nothing specific about being employed and not under notice - I don't recall this ever being mentioned but wasn't really concerned at prior times so may not have noticed 

jim1999

Mistermeaner said:

Thanks for input ; clearly waiting until money in the bank is the safest option but that would mean not putting in my 3 months for another 2 months (so 5 months total for potential new employer) - I will of discuss this but would understand they might think this a little long

Will also check prior communications regards the bonus - I'm fairly sure there's nothing in my contract but there is an old employee handbook that might have something in

There has also been a number of separate comms as the measures etc have changed over time

Be very interested in the legal angles of there is nothing specific about being employed and not under notice - I don't recall this ever being mentioned but wasn't really concerned at prior times so may not have noticed 

I've been down this road with the Employment Tribunal.  You can win, and my employer paid out my full bonus shortly before we went to tribunal. 

It is all dependent on contractual wording.  In my case the contract didn't make any comment relating to actually being employed at the time the bonus would be paid - but generally they do.

However, I really wouldn't want to go down that road unless I had no choice.  For me, I was happy to take the new job even if I lost the bonus, but obviously I still fought for it.

In short - yes you can fight it, and yes you can win.  But it would probably cost a few thousand in legal representation unless you DIY it or can convince your legal insurance to take on the case, require a fair bit of work and tussling with your old employer.

Exodi

I'd take the default position that they will not pay your bonus if they are aware you are resigning - I've seen too many threads of people outraged that this has happened, with the general response being 'why would you resign before you're paid a bonus?'.

Obviously time-frames aren't great, something that may be discussed with your future employer...

Undervalued

jim1999 said:

Mistermeaner said:

Thanks for input ; clearly waiting until money in the bank is the safest option but that would mean not putting in my 3 months for another 2 months (so 5 months total for potential new employer) - I will of discuss this but would understand they might think this a little long

Will also check prior communications regards the bonus - I'm fairly sure there's nothing in my contract but there is an old employee handbook that might have something in

There has also been a number of separate comms as the measures etc have changed over time

Be very interested in the legal angles of there is nothing specific about being employed and not under notice - I don't recall this ever being mentioned but wasn't really concerned at prior times so may not have noticed 

I've been down this road with the Employment Tribunal.  You can win, and my employer paid out my full bonus shortly before we went to tribunal. 

It is all dependent on contractual wording.  In my case the contract didn't make any comment relating to actually being employed at the time the bonus would be paid - but generally they do.

However, I really wouldn't want to go down that road unless I had no choice.  For me, I was happy to take the new job even if I lost the bonus, but obviously I still fought for it.

In short - yes you can fight it, and yes you can win.  But it would probably cost a few thousand in legal representation unless you DIY it or can convince your legal insurance to take on the case, require a fair bit of work and tussling with your old employer.

So, with all due respect, you don't actually know whether you would have won or not. You got your money which is great but large numbers of civil case and particularly employment tribunal cases are "settled on the steps of the court" for all kinds of reasons.

As you say it all depends on the wording and the OP would need to take proper legal advice as to whether he has a case worth arguing. By far the safer option is to delay and get the money in the bank unless he, like you, is willing to take the risk and treat getting the bonus as a bonus, if you see what I mean! 

Mistermeaner

thanks all for input; pulled some documents from emails etc today. There is nothing in my contract of employment other than a statement that I am eligible for the company bonus scheme. The employee handbook states 'see line manager for details of discretionary bonus scheme'
Probably most meaningful is a power point that was circulated last year advising of some changes to the bonus scheme calcs... on the last slide there is a section for anyone who has resigned that states "no further payment from ongoing programmes that have not completed" 
Thats certainly open to interpretation!
It also doesn't state anything about being on notice
Payments are apparently due in June (for last  calendar years business performance) so I am inclined to hand in my 3month notice beginning of april thus meaning I will still be employed in June when the payment is due - if they withhold I think I will be more than happy to argue the toss
What do folk think?

mirko

If the bonus is discretionary then I would be surprised if a business paid out to someone who they knew was leaving. They'd surely want to distribute their bonus funds among those already with them to keep their employees happy.

Undervalued

Mistermeaner said:

thanks all for input; pulled some documents from emails etc today. There is nothing in my contract of employment other than a statement that I am eligible for the company bonus scheme. The employee handbook states 'see line manager for details of discretionary bonus scheme'
Probably most meaningful is a power point that was circulated last year advising of some changes to the bonus scheme calcs... on the last slide there is a section for anyone who has resigned that states "no further payment from ongoing programmes that have not completed" 
Thats certainly open to interpretation!
It also doesn't state anything about being on notice
Payments are apparently due in June (for last  calendar years business performance) so I am inclined to hand in my 3month notice beginning of april thus meaning I will still be employed in June when the payment is due - if they withhold I think I will be more than happy to argue the toss
What do folk think?

The key word here is "discretionary"! As I said in an earlier post legally discretion is very wide unless it is "perverse". Obviously the general philosophy of your organisation and the level of goodwill (or otherwise!) to you personally is also a factor.

If you resign before getting the bonus it will most likely not be paid. You may be a lucky exception, nobody here can tell you for certain.

If it is not paid you will have to take proper legal advice as to whether you have an arguable case that is economic to pursue. You will also need to consider what harm pursuing such a case may do to your career in your industry. In some fields of work it can be a very small world and taking an employer to a tribunal, regardless of the rights and wrongs, is regarded as a big no, no!

Only you can decide!