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Bonuses: Your Discretion - Expert Comments

Just Employment Law
1st Feb 2005

There are still plenty of good reasons to give yourself a margin of discretion in the operation of your organisation's bonus scheme.

 

Even in the current economic climate there are still plenty of good reasons to give yourself a margin of discretion in the operation of your organisation's bonus scheme. Also, there are a number of steps you can take to minimise the risks:

 

  • Always have your contractual documentation professionally drafted, to ensure that there is as little ambiguity about the applicable terms as possible.
  • When drafting the scheme, try to think through some of the issues that might arise - what effect will issues like employee misconduct, financial difficulties or resignation be likely to have on your decisions?
  • If there are certain circumstances in which you know you will not wish to pay a bonus, make sure these are specified in the contract.
  • When exercising your discretion, remember that you may be setting a precedent for the future - if you are making a payment in exceptional circumstances, make it clear why you are doing so and say that this is a one-off.
  • Ensure that the scheme is drafted in a way that its terms can be changed for a good reason.
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