Bonus excluded upon termination of employment

The Court of Appeal has ruled that an employer does not have to include a bonus in payments made to an employee when their employment ends if the contract allows this.

In this case the contract allowed for a bonus to be paid after 12 months of employment and stated ‘you must be employed by the company in order to receive the bonus’. The employee’s employment was terminated 10 days short of the 12 month period, and he was paid payment in lieu of notice (PILON) based on salary only. The employee sought the unpaid bonus as part of the PILON payment, but the Court ruled that this was not how the contract could be construed given the wording relating to when the bonus became due.

Although the case is specifically related to the particular contract, it is a helpful pointer that it can be beneficial to specify in contracts when bonus payments will be made and what will happen to those payments when employment terminates in certain situations.

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