Bonus – terms and conditions

Oct 26, 2017 | Business owners tips and advice

Labour law applies to all employers and employees and aims to regulate labour relations. As a result, this ensures that fairness and reasonableness prevails in the workplace. Standard procedures, clear rules and guidelines in the workplace ensure that every individual knows what is expected from him/her. Consequently, this promotes proper communication between the employee and the employer. A common misconception in the workplace is that the employees are entitled to an annual bonus and increases.
An employee can only claim a bonus when it is prescribed by the Sectoral Determination or the Bargaining Council agreement applicable to that particular sector. Bonuses are paid solely within the discretion of the employer. The employer must ensure that the employee is aware of the fact that bonuses don’t form part of the terms and conditions of employment by confirming this in writing. As a result, no reasonable expectation is created.

The employer must continuously evaluate and assess the work performance of the employees in his/her employment. As a result, the assessment can then be utilised to motivate the awarding of bonuses and other salary adjustments. All employees have the obligation to perform duties and tasks as agreed upon. Hence, these duties and tasks must be carried out in a manner which satisfies the employer’s required standards in terms of quality and quantity. It is the employer’s duty to exercise control in the workplace if an employee’s performance does not meet the required standard.

Bonuses

Bonuses can be a useful tool to reward employees for work performance which exceeds the employer’s expectations. It can also be used to motivate and encourage employees to improve their work performance continuously. It is important to communicate to employees the terms and conditions of bonuses to prevent any future disputes. There are different types of bonuses for which an employee may qualify in the workplace:
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A thirteenth cheque

This type of bonus is considered a condition of employment. As a result, the employee has the expectation of a thirteenth cheque every year as part of his/her compensation package. If the employer wishes to terminate or amend the practice of paying a thirteenth cheque, the employer must consult with the employee and the employee must agree to the change in the terms and conditions of employment.

The employer may not amend the terms and conditions of employment unilaterally. A unilateral change in terms and conditions of employment can be regarded as unreasonable and unfair. The employee may refer the matter to the CCMA. A valid reason to terminate the practice of paying the employees a thirteenth cheque will be when an employer cannot afford to pay bonuses due to financial constraints and withholding bonuses could be regarded as an alternative to retrenchments. Employers must be cautious not to discriminate against any employee in terms of the employee’s terms and conditions of employment, policies and benefits.

Performance bonus

The performance bonus can be awarded to an individual for exceptional work performance. The employer has the discretion to award a bonus or to decide not to award a bonus. This bonus can be payable monthly or per annum. It can be forfeited in the event that the employee’s work performance does not meet the required standard. It is important that the employer sets a required standard which the employees need to meet. Employers must continuously evaluate and assess employees to ensure that poor work performance is immediatley identified and addressed correctly.

Production bonus

The production bonus can be awarded in instances where the employees have a certain production target that they must reach. In the event that the employees meet the target or exceed the target it would be the employer’s discretion to award a production bonus. Management should set particular targets that the employees must meet and these targets must be sufficiently communicated to the employees.

When an employee alleges he/she is entitled to a bonus, the onus rests on the employer to prove the contrary. It is important that an employer continuously assesses the employee’s work performance, as well as keep records of these assessments.

In conclusion

Employers manage various business risks on a daily bases. The best method for an employer to address the labour risk in a business is to act proactively. Employers should ensure that they have proper contracts of employment, disciplinary codes, procedures and policies in the workplace. Furthermore, these documents must adhere to all relevant legislation. It is very important to consider the role labour plays in the work environment and to understand that legislation can be used to the employer’s advantage. The importance of complying with labour legislation must be emphasized and be the number one priority.

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