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As the holiday season fast approaches, many employees have put year-end bonuses at the top of their wish list as recognition for all of the work that they have been doing throughout the year.
However, bonuses are not a guaranteed given.
“There is no legislation within the South African context which obliges employers to pay bonuses to its employees,” said professional support lawyer at Cliffe Dekker Hofmeyr, Nadeem Mahomed in an interview with SAfm.
“A bonus is always a good thing to have, especially at the end of the year… [but] a bonus is only payable if there is a guaranteed right,” explained Mahomed.
Mahomed outlined that there are two ways in which bonuses can be regulated, falling under a guaranteed right:
The first is seen within a contractual right as part of the conditions of employment. This is by way of an employee’s contract of employment or remuneration policy where the actual amount of the bonus has been negotiated up-front, agreed upon and predetermined – not relying on the discretion of the employer.
“If a bonus is guaranteed in that way, then such a bonus would ordinarily be payable,” said Mahomed.
The second (and most common) is where a bonus payment is dependent on the discretion of the employer by way of a benefit. “This is the vast majority of instances,” said Mahomed.
What this typically does is provide the employee the right to participate in a type of bonus pool or scheme and the right to earn a share from it. How much one is paid from the pool or scheme is up to the discretion of the employer. The decision can be based on numerous factors, such as company performance and employee and team deliverables.
For this benefit, Mahomed says that “the employer has to exercise their discretion in good faith, [and] in a reasonable way and a fair way”.
According to Mahomed, most disputes between employees and employers arise when employers have discretion over bonuses, as it is a determination of assessment and not a predetermined remuneration.
If there is an instance where an employee feels unfairly treated, “the recommended way is for the employee to seek clarification from the employer on what were the reasons that were taken into account in terms of coming to a determination on what bonuses were paid, or not paid, or how much was paid,” said Mahomed.
An employee can also lodge a grievance procedure into the way in which their employer exercised that discretion – which could fall under an unfair labour practice. As part of the proceedings, the employee would have to provide evidence to demonstrate that their [the employers] discretion was exercised “unfairly and in bad faith,” said Mahomed.
Mahomed concluded by saying that “an employer should not dismiss or discipline an employee on the basis that they are asking these questions regarding the bonus payment, or lodging a grievance in relation to the payment of a bonus”.
Read: How to spend your bonus in South Africa
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