The Careers Blog This article is more than 14 years oldReceived a smaller bonus than your colleague?
This article is more than 14 years oldIn spite of recent controversy, City bonuses continue to be paid out, but what can you do if you receive a bonus which is less than that of a colleague performing a comparable job, or receive no bonus at all?As has been recently publicised women earn an average of 60% less than men in the financial services industry — this disparity is higher than in any other industry. It is no wonder that this is a ripe area for employment claims.
Bonuses are a way of rewarding good performance and incentivising employees. Some employment contracts may guarantee a bonus, but most are expressed to be discretionary. It can also be difficult to obtain evidence as to whether a colleague has been paid a higher bonus than you due to the operation of secrecy clauses in your contract of employment. There is also no obligation on employers to make the criteria for awarding bonuses transparent and of course unsurprisingly, most elect not to do so.
It is unlawful however, to use bonuses to discriminate against an employee because of their sex, race, age, disability or religion. Performance should be the only satisfactory basis for an employer to justify any differences.
Any claim for discrimination must be brought within three months of the date the bonus was paid.
To succeed, you need to show that you have been treated less favourably than your colleagues, for example, because you are pregnant or have been on maternity leave.
Discrimination cases are often brought by women who claim that the macho culture in the City makes is permissable for male employees to be rewarded with higher bonuses than their female counterparts without foundation.
Recent case law has established that an employer's general discretion when it comes to bonuses should not be unfettered or be without subject to challenge by the courts.
In one of the leading cases, Clark v Nomura, Mr. Clark's bonus scheme was discretionary and dependent upon his performance. However, the court found that an employer's discretion must still be exercised in good faith and not irrationally or perversely. Given that Mr. Clark had earned approximately £22 million in profits for Nomura in the relevant year, it was held that Nomura's decision not to award him a bonus was perverse and that Mr. Clark was entitled to a bonus of £1.35m. This case illustrates that employer's do not have unlimited discretion.
Subsequent case law shows that employers who do not have transparent bonus schemes will find it difficult to justify the exercise of any discretion, in the absence of a paper trail to back up their decisions, such as appraisals or warnings about poor performance. In another leading case (Bower –v- Schroder Securities Limited), Ms Bower successfully claimed the sum of £1.4m against Schroders by arguing that there had been unlawful discrimination in the payment of her bonus.
Provided that you have more than one year's service, you could also raise an additional claim by resigning and claiming constructive dismissal as a result of your employer being in breach of the implied term of trust and confidence that exists in any employment contract. Given the current job market, it would be a brave soul though who took this draconian step and professional advice should always be obtained beforehand.
For claims relating to contractual bonuses (not discretionary), you can bring a claim for a breach of the Equal Pay Act 1970. Under the Act, any clauses relating to bonus pay in an employment contract are deemed to include an "equality clause". To make a claim, you need to find a comparator of the opposite sex who is paid a higher bonus than you and show that their work is of equal value. If your claim is successful, an equality clause will be inserted into your contract to ensure you are paid the same as your comparator and you can receive retrospective pay up to a maximum of six years.
Looking ahead, The Equality Bill which is currently being considered by Parliament, will ban secrecy clauses (which presently prevent employees from disclosing their bonuses) from employment contracts. This will mean that companies with more than 250 employees could be ordered to publish information which could show disparity in pay. I am sure these measures will open up the process of awarding bonuses and reduce disparities in the future. In the meantime, employees can only hope that their employers operate a fair and transparent bonus policy.
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