Change to Bonus - Is mine contractual?

Hi, thanks in advance for any help / guidance. I have tried to provide as much information as possible, happy to answer any queries.

Some history, I was employed by Company A, 4 years ago and at the time Company A was being taken over by Company B, Company B being my current employer.

During my negiotations, I recieved a Offer Letter and a Contract of Employment, but referencing both Company A and B details (i.e. Logo, addresses etc).

3 years ago, I was informed by Company B that as part of the transistion, I was being placed into Company B's grading system for roles, and the grade I have been placed in, results in my salary being above the grade, which means I will no longer receive any pay rises.....I fought this and got my role reassessed to no luck, I have had no pay rise of any sort for the past 3 years.

Fast forward 3 years, I have now received a letter stating that I was being transferred onto the Company B "bonus plan", this means going from being able to acheive upto a fixed amount, to instead being able to achieve upto 12%.

For me this, this is a overall reduction of approx £2.5k.

I responsed to this notification stating I am unable to accept it, as with the fact that I have had my pay frozen for 3 years, the company is now effectively reducing my income. I have achieved 100% of my KPI's in the last 3 years and achieved 100% of my bonus consistently, so there is no reason I would continue to achieve this.

I took the soft soft approach, talking about how it would affect our household fiances etc, and the HR have responsed acknowledging the effect however have stated that I have to be transferred to the Bonus Plan, and that in accordance to the Handbook, bonuses can vary, withdrawn and are not a contractual benefit but discretionary.

Soooo... 2 years ago, I asked HR to confirm if my Offer Letter formed a part of my Contract of Employment, which they confirmed, Yes.

My offer letter has 1 reference to a Bonus, which is below:

"Subject to the successful achievement of your agreed budget targets and KPI's, you will be entitled to a gross bonus earning potential of £xxxxx per annum. You are required to be employed by the company at the time when the payments are made and are subject to being prorated based on length of service and managers discretion"

Going through my Contract of Employement, there is only 3 references to Bonus:

"Bonus Payments, if applicable, will be paid to you, however you are required to be employed by the company at the time when the payments are being made and are subject to being pro-rated based on length of service"

The second is a mention of Payment of Lieu in case I am terminated by the Company, that I would not receive a Bonus.

The third, is providing the details of the term "Deductions" under the subject of Termination of Employment.

There is no other references to Bonus across both documents or any mention to the Bonus being discretionary. I searched for the word "Bonus", to ensure I didnt miss anything.

Am I right in saying, in my case, my Bonus, as its detailed specifically in the Offer Letter, is contractual? And if so, HR should have consulted instead of notifying?

How do you think I should approach this?

Thanks!

Replies

  • edited 13 March at 11:40AM
    UndervaluedUndervalued Forumite
    8.2K Posts
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    edited 13 March at 11:40AM
    Hi, thanks in advance for any help / guidance. I have tried to provide as much information as possible, happy to answer any queries.

    Some history, I was employed by Company A, 4 years ago and at the time Company A was being taken over by Company B, Company B being my current employer.

    During my negiotations, I recieved a Offer Letter and a Contract of Employment, but referencing both Company A and B details (i.e. Logo, addresses etc).

    3 years ago, I was informed by Company B that as part of the transistion, I was being placed into Company B's grading system for roles, and the grade I have been placed in, results in my salary being above the grade, which means I will no longer receive any pay rises.....I fought this and got my role reassessed to no luck, I have had no pay rise of any sort for the past 3 years.

    Fast forward 3 years, I have now received a letter stating that I was being transferred onto the Company B "bonus plan", this means going from being able to acheive upto a fixed amount, to instead being able to achieve upto 12%.

    For me this, this is a overall reduction of approx £2.5k.

    I responsed to this notification stating I am unable to accept it, as with the fact that I have had my pay frozen for 3 years, the company is now effectively reducing my income. I have achieved 100% of my KPI's in the last 3 years and achieved 100% of my bonus consistently, so there is no reason I would continue to achieve this.

    I took the soft soft approach, talking about how it would affect our household fiances etc, and the HR have responsed acknowledging the effect however have stated that I have to be transferred to the Bonus Plan, and that in accordance to the Handbook, bonuses can vary, withdrawn and are not a contractual benefit but discretionary.

    Soooo... 2 years ago, I asked HR to confirm if my Offer Letter formed a part of my Contract of Employment, which they confirmed, Yes.

    My offer letter has 1 reference to a Bonus, which is below:

    "Subject to the successful achievement of your agreed budget targets and KPI's, you will be entitled to a gross bonus earning potential of £xxxxx per annum. You are required to be employed by the company at the time when the payments are made and are subject to being prorated based on length of service and managers discretion"

    Going through my Contract of Employement, there is only 3 references to Bonus:

    "Bonus Payments, if applicable, will be paid to you, however you are required to be employed by the company at the time when the payments are being made and are subject to being pro-rated based on length of service"

    The second is a mention of Payment of Lieu in case I am terminated by the Company, that I would not receive a Bonus.

    The third, is providing the details of the term "Deductions" under the subject of Termination of Employment.

    There is no other references to Bonus across both documents or any mention to the Bonus being discretionary. I searched for the word "Bonus", to ensure I didnt miss anything.

    Am I right in saying, in my case, my Bonus, as its detailed specifically in the Offer Letter, is contractual? And if so, HR should have consulted instead of notifying?

    How do you think I should approach this?

    Thanks!
    I am not sure that you are right I'm afraid.

    A contract of employment is more than just a sheet of paper with the word "contract" on it. It encompasses all of the terms of agreement and rules, both written and verbal, relating to your employment. The "contract" document doesn't automatically trump the offer letter (and certainly not only when it suits)!

    Arguably a hard and fast bonus entitlement isn't really a bonus at all. It is in some way more commission or an agreed share of profits - if any.

    Your quote from the offer letter says "potential" and your contract document says "if applicable". Also nothing you have posted says how the bonus amount is calculated or if the same rules and percentages of salary have to apply equally to all staff.

    I think this is complicated and would need specific legal advice from a solicitor who can study all of the relevant documents and company procedures. Sadly that may well cost more than the amount is dispute with no guarantee of success.

    Finally, even if you did win this argument, realistically how would that leave the working relationship?
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