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Watch those discretionary bonuses

8 January 2016
The recent case of Paturel v DB services (UK) ltd [2015] is a useful reminder about awarding discretionary bonuses. Mr Paturel argued that although his bonus was discretionary, the fact that two of his colleagues had been awarded significantly higher bonuses was a breach of contract.

The High Court disagreed with Mr Paturel and found that his employer had sound reasons for offering his colleagues a higher bonus. This decision is consistent with the courts' non-interventionist approach to discretionary bonuses. So does that mean employers can be fairly relaxed about the process of awarding discretionary bonuses? No - this does not give employers the green light. First, care should be taken to set clear expectations. The High Court noted that expectations are a relevant consideration in assessing whether or not an employer has acted irrationally or perversely. Secondly, there has to be some justification in the process to avoid other claims, such as discrimination. So the long and short of it is that as long as you have a clear policy, you have set and managed expectations, and you have some objective justifications to explain your decision you will be able to successfully defend your position.

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