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Legal lessons - Staff insist on Christmas bonus

Further advice on practice problems from barristers Michael Salter and Chris Bryden

Further advice on practice problems from barristers Michael Salter and Chris Bryden

THE SITUATION

In the past I have always paid a Christmas bonus to my staff in cash. This year, however, I cannot afford to do so. The staff say I have to. What can I do?

THE ADVICE

The payment of any bonus is governed by the contract of employment between the practice and the individual employee. Terms of the contract can be either express – ie set out within a written document – or implied.

The courts have recognised that one way a term can be implied into any contract of employment is through a custom or practice that has built up over time. Thus, if for a long period of time the staff have received bonuses at Christmas, there may be a strong argument that they are contractually entitled to one this year. A failure to pay a bonus may therefore amount to a breach of contract.

In determining whether there is an implied term a tribunal would have to consider all of the relevant facts and come to a decision as to whether the payment of the Christmas bonus in past years amounted to a custom or practice.

To avoid arguments and potential claims, it may be worth reissuing all members of staff with a new contract and statement of terms and conditions containing an express term specifying that bonuses are at the absolute discretion of the practice and will only be paid if the practice can afford them. Should your contracts already include such a clause there will be no difficulty.

However, any change to the employees' terms and conditions of employment needs the consent of the employees affected. If an employee refuses to consent to the variation, then an option open to the practice would be to terminate the employee's contract and immediately offer re-employment under the terms of the new contract. Note, however, that careful procedures must be followed to ensure that the employee does not then bring proceedings for unfair dismissal.

In all likelihood a claim against the practice for breach of contract in failing to pay a Christmas bonus is not likely to lead to a large award should a breach be demonstrated.

However, such a claim could form part of a wider claim, or be relied upon as a ‘last straw', which led an employee to resign following a number of earlier breaches. So It makes good sense to ensure that contracts of employment contain a clause such as the one suggested above, or alternatively that Christmas bonuses continue to be paid once a custom or practice has been established.

Michael Salter and Chris Bryden are barristers at 2 Gray's Inn Square Chambers: www.2gis.co.uk

Legal points are provided for information and discussion only and are given without obligation. For specific legal advice consult your solicitor

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