Employers are free to award bonuses to their employees. In any case, there are many benefits associated with such perks. For example, they keep employees motivated, increase engagement, and can be a useful tool for persuading candidates. Do you wish to award bonuses or make agreements regarding this with (new) employees? If so, it is advisable to seek legal advice first.
The employer is free to award bonuses
In principle, there are no rules attached to a bonus. The employer decides whether to award a bonus and may base it on targets set by the employer. However, a general rule is that the employer must act as a good employer. Therefore, the bonus policy must not discriminate. The awarding of bonuses must not be arbitrary. If Pieter holds the same position as Jan and they have both performed equally well, it is unfair for Pieter to receive a bonus while Jan does not.
However, this does not mean that all employees must receive a bonus. The employer can take targets and job roles into account. He will, however, have to provide a sound justification for why some receive a bonus and others do not. That justification is assessed against the principle of good employment practices.
Taking into account bonus schemes and profit-sharing schemes
Awarding a bonus is a voluntary decision by the employer, but there are a number of exceptions to this. If an employer agrees on a bonus scheme with an employee, the employer must also adhere to the terms of this scheme. The scheme usually states when the bonus is awarded and the amount of the bonus. The employer cannot simply deviate from this.
A common example of this is a profit-sharing scheme. Under a profit-sharing scheme, employees receive a share of the profits generated. The profit-sharing scheme clearly states what is meant by profit, how and when the profit distribution takes place, and how the distribution is divided. The advantage is that the employer does not have to award a bonus if no profit is recorded. On the other hand, the employer can no longer deviate from this, for example, if they suddenly wish to use the profit to make new investments.
Voluntary bonus can become very involuntary
It is also possible that bonuses, even if not agreed upon, have become part of the employment contract. If the employer has been awarding a specific bonus for years upon achieving a particular target, he is reasonably obliged to do so again this year if the target is met. An employee who does not receive the bonus could then file a wage claim.
Have a bonus scheme drafted by MKB Juristen
An employer can very easily award bonuses, even if no agreements have been made regarding this. However, frequently awarding bonuses can turn it into an obligation. Agreeing in writing on a profit-sharing scheme or bonus scheme has the advantage of clarity, but it is important to carefully consider how the targets are formulated. Deviating from them is then very difficult. Do you want to award bonuses and do you have any questions about this? Or do you want to include a bonus scheme in an employment contract? Then it is very important to seek legal advice. Schedule an intake meeting and our corporate lawyers will assist you immediately.
