Currently working for a US company who has decided to shut down the UK arm of the business.
A few of us are in sales roles and are paid a quarterly bonus with the last bonus paid end Jan 2021.
Am sorting out my settlement figure and UK law states that when you calculate redundancy you should average out the payments made to employees over the last 12-weeks.
So I believe I should be getting 3 x months worth salary + my bonus that was paid in Jan. Plus some soft extras like holiday, car etc…
Have just heard back from HR in the USA who have advised that “…we will not be paying a 12-week average as your bonus is discretionary as per your contract”.
This sounds crazy as I’ve been paid it every quarter for the last three years so surely this sets a precedent and wipes out their “discretionary” tactics.
Have I grounds for unfair payment of due monies please?
Bonuses for most employees are generally discretionary rather than contractual - so it might be down to good will on the employers part in a negotiation.
The exception is often sales roles - whee targets and associated bonuses are often baked into the employment contract, making the issue much more black and white in your favour.
Either way - there is scope to negotiate, and add a “loss of office” payment - which is a term used for anything over and above clear contractual terms.
I am in the sales team but the contract specifically says the following so they have a get-out “…please note the Compensation Plan is discretionary and may change at any time without notice”.
Ironically, I’m due to have a separate outstanding bonus paid in my final lump sum so surely they can’t say “sorry it’s discretionary and we won’t include the Jan 2021 12-week averaged bonus. Oh, but by the way we’re still paying you your outstanding due bonus”.
The fact that it is discretionary - that’s the nature of bonuses of course - does not mean that you were not paid it, and if you were paid it then it should be taken into account in calculating your redundancy pay. It’s very clear on the acas guidance to employers, which of course links to the 12 week calculation on the gov.uk website.
Almost all employment solicitors will provide you with a half-hour consultation free of charge. In your case it will make a lot of sense to find someone local to you and see if they will discuss this matter.
It may also be prudent to request them to draft letters for you too - this need not be expensive and may prove a sound investment on your behalf.
Having been in a similar situation a few years back, I know that typically US employers have no idea of UK employment law and they try to use the “hire and fire” techniques that are common in the US. Were you given due notice of redundancy? If not you likely are able to claim unfair dismissal for not following due process on top of whatever they are offering. But as others have said get some proper advice. Often the threat of going legal will result in them rolling over and just paying out rather than going to court.
First obvious question is, are you a member of a union? If so, they will be able to give the correct answer.
Most legal advisors, are not experts in employment law. They may say they are, but do check. Employment law tends to be enacted, if that is the right word, in an employment tribunal. This will be your recourse if you employer does not play ball.
My feeling, is that as a bonus is non contractual, it is unlikely to be included. Also, I’ll assume you will be looking at statutory redundancy, rather than end discretionary element that you employer offers?
I used to work with Japanese and American companies inwardly investing in the UK, the Japanese were far better at adapting , despite or because of the cultural / language gap. American companies were always trying to import their American ways, i.e they always thought providing health care was the first employee benefit the UK staff would be looking for.
Hi Gav,
firstly, sorry to hear about the redundancy.
I couldn’t tell from your post whether you have been given notice, which you are working through, or whether you have been given notice, not required to work, and are instead getting a PIL (payment in lieu of notice). I assumed the latter. It is my understanding that items such as car, medical insurance etc should continue for the whole of the notice period, or a fair value of these to included in your PIL.
The question of bonuses is more complicated, but the extract below is a reasonable summary of the situation.
“…Often, the question will arise whether payment of a discretionary bonus should still be made on termination of your employment – whether you have resigned or been dismissed. The big issue will turn on whether or not your are still employed as at the “bonus payment date”. This is because most contracts of employment will link your eligibility to qualify for payment based on whether you are still in employment at this date. One way for your employer to ensure you don’t meet this qualification is to make you redundant or dismiss you for poor performance at the same time as making you a payment in lieu of notice. This means you will not be employed as at the bonus payment date. The courts have generally upheld this as a valid reason for employers not to pay- as long as your contract states you must be employed at the bonus payment date to be eligible to receive the bonus…”
In most cases, a PIL is subject to tax and NI, but not in all cases, and it is worth checking your contract of employment to see if it is mentioned explicitly. Many employers won’t take the risk, and will automatically tax and NI it, to avoid any HMRC challenge and ultimate liability. One potential route is for the employer to technically be in breach of contract and not pay PIL, but instead offer you a “compensation” payment for breach of contract. Patently, this needs to be an amount which leaves you at least as well off as the PIL route, but it can be made without deduction of tax and NI. It also saves the employer NI as well.
Hope that helps, and good luck.
I meant to add that holidays should also continue to be accrued during the notice period, but employers are allowed to make you take holidays earned as part of that notice period. Any holidays earned but not taken should be paid or at least included in the computation of any PIL.
Thanks to all that responded here with such detailed information and apologies for not reposting earlier but my heads not been in a good place and I’ve been away from forums for a week or so.
It all got sorted last week thankfully and got paid off today the sum I was expecting although there is still an argument to be had regarding a recent bonus (paid April 2021) not being included in my 12-week average. They did however include the last three months average which included a bonus in Jan 2021.
Anyway, door is shut now and hopefully onto better things soon. Fingers crossed I can get somewhere to start in May and just have the next three weeks off to forget about it all.
