Bonuses 101: A Guide to Managing Bonuses
Many employers routinely consider the award of bonuses to their staff at this time of year and inevitably this leads to disputes with some staff members about the failure to award a bonus to them at all or at a particular level. In this blog, we set out some factors of which employers should be mindful when making bonus-related decisions.
Entitlement to a bonus
The contractual status of a bonus is a significant factor to consider. Generally, offer letters and employment contracts outline eligibility to earn a bonus without explicitly guaranteeing it. They often state that the bonus scheme's operation and the amount awarded are solely at the employer's discretion. Bonuses are typically contingent upon the employer's business performance, the employee's work performance, or a combination of both during the previous year.
Even if bonuses are described as discretionary, there might still be a contractual entitlement to them implied in the employment contract. This could happen when an employee consistently receives a bonus at a particular level over an extended period due to custom and practice. If a contractual entitlement exists and the employer fails to pay the bonus, it could lead to a breach of contract claim or a complaint about an unlawful deduction from wages. It may also contribute to a constructive dismissal claim. In some cases, bonuses might be factored into loss of earnings awards in unfair or constructive dismissal cases.
The entitlement to a bonus may be contingent upon the employee remaining employed (and not serving notice) at the time of the award and not facing any performance or disciplinary issues. However, in instances where no express condition exists, courts have rejected implying such terms.
Employers should be aware that even if they have the discretion to terminate a bonus scheme, they cannot withhold bonuses that employees have already earned and accrued under the scheme as it was at the time. This means that once employees meet the conditions for earning the bonus, they have a right to receive it.
Exercising discretion to award a bonus
Bonuses are typically evaluated based on objective individual and/or business performance criteria. Employers must clearly define the criteria and decision-makers responsible for awarding bonuses at specific levels. Bonuses may come in various forms, including stock options, subject to the scheme's terms. However, caution should be exercised to avoid conditions that could be seen as a restraint of trade or penalty clause, as these might be deemed void due to public policy considerations.
In cases where bonuses are discretionary, employers cannot exercise their discretion arbitrarily or unfairly. The decision-making process must be carried out in good faith, consistently, and in line with the implied duty of trust and confidence. While equality laws do not require identical treatment of employees, employers should be especially cautious not to discriminate based on any protected characteristics. Ensuring fairness and transparency in bonus allocation fosters a positive work environment and reinforces the employer-employee relationship. Employers should be mindful to avoid any discrimination amongst employees based on any protected ground(s):
- Gender
- Marital status
- Family status
- Age
- Disability
- Sexual orientation
- Race
- Religion
- Member of the Traveller community
Employees on leave
Care should be taken regarding employees absent on sick leave during the performance year.
The general principle in relation to maternity leave is that where a bonus comprises payment for work done, an employer is entitled to make a pro rata reduction in the bonus award for an employee’s absence on leave. However in many cases, there is scope for dispute about whether bonuses are in respect of work done. This area can be fraught with risk, and close consideration should be paid to whether a bonus is expressed to relate to company performance only or in combination with individual employee performance.
Remote Working Updates by the HSA
The responsibility for safety and health at work rests with the employer regardless of whether an employee works remotely or at the employer’s premises. Employers must provide a safe work environment and, in doing so, assess the risks and ensure appropriate controls are in place to safeguard employees at work.
The Health & Safety Authority (HSA) have now updated their Remote Work Guidance and Checklist. This guidance provides useful information and advice on managing remote working away from the employer’s normal work premises. If you have employees working from remotely (from home or from a work hub), this guidance is applicable to your business.
In addition, they have issued separate guidance on Managing Psychosocial Hazards in the Workplace. This Information Sheet gives practical advice on what psychosocial hazards are, and the roles and responsibilities of employers and employees in relation to managing psychosocial hazards.
Click the links below to find out more:
• Remote Working Guidance and Checklist
• Psychosocial Hazards Information Sheet
Common Parental Leave Questions
There are several different types of leave available to parents in Ireland. What employees are entitled to depends on their circumstances.
- Maternity leave: If employees become pregnant while in employment, they may be entitled to maternity leave. While employers don’t have to pay employees during this time, they might be eligible for maternity benefit for the first 26 weeks. They are also entitled to an extra 16 weeks of unpaid maternity leave
- Paternity leave: New parents are entitled to 2 weeks paternity leave from employment or self-employment following the birth or adoption of a child. Employers do not have to pay for this leave but employees may be eligible for paternity benefit
- Adoptive leave: One parent of the adopting couple or a parent who is adopting alone is entitled to 24 weeks of adoptive leave, beginning on the day the child is placed with them. Employers do not have to pay an employee for adoptive leave but they may be entitled to adoptive benefit. They are also entitled to an extra 16 weeks of unpaid adoptive leave
- Parent’s leave: Parents of children under two and parents of adopted children in the first two years of adoption are entitled to seven weeks paid parent’s leave
- Parental leave: Each parent is entitled to 26 weeks of unpaid parental leave before a child is 12 years of age
Rights as a parent
Before employees apply for time off work, it is important to understand what their entitlements are.
Under Irish law, parents are allowed to take unpaid leave from their job to look after young children. This is called parental leave. Employees can take up to 26 weeks off work for each eligible child. Parental leave is to be used only to take care of the child concerned. If it is taken and used for another purpose, the employer is entitled to cancel the leave.
What is parental leave?
Under Irish law, parents are allowed to take unpaid leave from their job to look after young children. This is called parental leave. Employees can take up to 26 weeks off work for each eligible child. This includes parents, adoptive parents and ‘in loco parentis’ (that means they take the role that would usually be fulfilled by a parent).
Parental leave is available for each child up until their 12th birthday. This may be extended in the following circumstances:
- If the child was adopted between the ages of 10 and 12, employees can take the leave that they were entitled to up to two years after the date of the adoption order
- If the employee's child has a disability or long-term illness, then they may take leave up until they are 16 years of age
- If illness or another incapacity stopped an employee from taking the leave before the child reached the age limit, an extension may be allowed
Do employees get paid while on parental leave?
Employees are not entitled to pay or pension contributions from their employer while on parental leave. They are also not entitled to social welfare payments. Taking this leave does not affect any of the other employment rights.
Employees can get credited PRSI contributions while taking leave. The employer must write to the Records Update Section of Department of Social Protection (DSP), detailing the weeks the employees have not worked, so that they can get credited PRSI contributions for this time.
Is there a limit to how much leave employees can take?
If employees have more than one child, they are only entitled to take 18 weeks total in a 12-month period. However, this can be extended if the employer agrees. If an employee has twins or triplets, they are allowed to take more than 18 weeks of parental leave in a year.
If employees work part-time, their entitlement to leave is reduced on a pro-rata basis.
As the legislation only sets out the minimum entitlement is in terms of how many weeks are available to take, employers can have a greater amount than this in the contract.
Do employees have to take all of their leave at once?
No, but employees are allowed to do that if they want to. They can also take it in two separate blocks but must take at least six weeks in each block. There must be a gap of at least 10 weeks between the two periods of leave per child.
However, if the employer agrees, the leave can be separated into periods of days or even hours.
Are partners entitled to the same amount of leave?
Both parents are entitled to their own 26 weeks of parental leave. If employees both work for the same employer and the employer agrees, one employee can transfer 14 weeks of their leave entitlement to each other.
What happens if an employee gets sick while on parental leave?
Parents who fall ill while on parental leave are allowed to suspend the leave for the duration of their illness, but only if that illness leaves them unable to care for the child.
They will have to provide their employer with written notice and relevant evidence of the illness to their employer as soon as is reasonably possible in order for the leave to be suspended.
What happens to employees' annual leave?
During parental leave, employees are regarded as still working for employment purposes and so they can still build up annual leave entitlement. If their annual holidays fall during the period of leave, then they can take them at a later time.
If a public holiday falls while they are off and it takes place on a day when they would normally be working, it is added to their period of leave.
Can employees return to their old job after time off?
Employees are entitled to return to their job unless it is not reasonably practicable for the employer to allow them to return to do so. In this instance, employees must be offered a suitable alternative on terms no less favourable compared with the previous job, including any improvement in pay or other conditions which occurred while on parental leave.
When they return to work, they are entitled to ask for a change in the work pattern or working hours for a set period. Employers must consider their request and respond within four weeks but is not obliged to grant it.
Employees who take parental leave are protected by law from unfair dismissal.
What happens if employees switch jobs?
If employees change their job and have used part of the parental leave allowance, they can use the remainder after one year of employment with the new employer, provided the child/children are still under the qualifying age.
How should employees apply for parental leave?
In general, employees must have been working for the employer for at least a year to get the full amount of parental leave. To apply, they need to:
• Give notice in writing
• Inform the employer at least six weeks before the leave is due to start
• Include the start date, the way the leave will be taken and the duration of the leave
• Sign a confirmation document between the employer/employee confirming the details of leave at least four weeks before the leave is due to start
Can an employer say no?
Employers can only deny the request if employees do not meet the criteria to be eligible for leave.
If an employee has been working for the employer for anywhere between three months and a year, they may still qualify for pro-rata parental leave if the child is very near the age threshold. This allows employees to take one week of leave for every month of employment completed.
Can an employer postpone my parental leave?
An employer may also postpone the leave for up to six months, but this must be done before the confirmation document is signed. After six months, the leave cannot be postponed without further written agreement; grounds for such a postponement include lack of cover or the fact that other employees are already on parental leave.
Normally only one postponement is allowed, but it may be postponed twice if the reason is seasonal variations in the volume of work.
New Statutory Leave Updates
The Work Life Balance and Miscellaneous Provisions Act 2023 was signed into law on the 4th April 2023. From the 3rd of July, two of the changes are coming into effect. These are:
• a breastfeeding at work extension
• unpaid leave for medical care purposes
The breastfeeding at work entitlement has been extended from 6 months to 2 years after the birth of a child. Employees are entitled to take one paid hour off work each day. It can be taken in the examples below:
• One hour break
• Two 30 min breaks
• Three 20 min breaks
Employees have an entitlement to 5 days of unpaid leave per year for medical care purposes. Apart from doing so for the employee’s own medical care, an employee will be allowed take this leave for:
• their children,
• spouse, civil partner or cohabitant,
• a parent,
• a grandparent,
• a sibling,
• any person living in the household
