GUEST COMMENT: A legal checklist for if you're not happy with your bonus

What are your options if your bonus is a) disappointing or b) not paid at all? This article is intended to act as a practical guide to making amends.

1) Were any promises made to you about payment of bonus before you accepted a job and were they written down?

You may have been verbally promised a bonus before you joined, but many employers include wording in a written contract making it clear that the written terms are conclusive and discussions that took place before it was signed are not binding.

2) Is there a term in your contract entitling you to a bonus?

In the absence of a guaranteed bonus, it is very likely that the employer will have some discretion over how much to award; however, this does not mean employers are free to set the amount of a bonus on a whim. Two factors, in particular, can limit an employer's power to pay reduced or no bonus - terms implied by the courts limiting employer's absolute discretion, and discrimination law:

· Employers must exercise their discretion in a rational way, which may mean looking beyond an individual's performance and at other factors such as the overall performance of an organisation, or team within that organisation. This is consistent with CRD3 principles which require employers to take into account the performance of the business unit and the firm as a whole and not to pay bonuses if payment is not sustainable in the light of the firm's financial situation.

· Where the reason for the bonus decision is tainted by unlawful discrimination - for example on the basis of gender, maternity, age, or disability.

3) If there is no written term in your contract, does that mean you have no right to a bonus?

It's fairly unusual for an employer to operate a bonus scheme without putting it in writing, but it's possible for an enforceable contractual right to come into existence as a result of an employer following a consistent practice over a period of time, or for a written incentive scheme to be altered by the effect of custom and practice.

4) If they bonus scheme documents say the scheme is discretionary, can you challenge your employer's decision?

Not necessarily. A clause stating that an employer could cap the amount of a bonus in "exceptional circumstances" was held not to allow the employer to impose a cap when an employee had a particularly successful year.

The courts have established that employers must base bonus decisions on rational grounds and not award bonuses capriciously.

5) Have you given, or are you under, notice to terminate your contract of employment?

Most bonus incentive schemes will set out rules covering rights to bonus payments when an employee is leaving. Any rule restricting the payment of bonus to employees still in post at the payment date will only be effective if it is known to the affected employees in advance.

It can also be argued that if an employer gives notice of termination with the intention of depriving an employee of their bonus, or makes it unnecessarily difficult for an employee to make bonus targets, these are breaches of contract which could give the employee a damages claim.