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Can you make an employee pay back his bonus if he resigns?

by , 06 December 2013
It's that time of the year when festive cheer and good spirits are in full swing. The fact that December is bonus month for most employees across the country definitely plays a part in the festivities.
Unfortunately, just as you're paying out those bonuses some of your employees are seriously thinking about resigning.... Not that they'd tell you about it now.

So can you make your employee pay back his bonus if he resigns after getting it? Read on to find out what the answer is...

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Five steps to make sure employees don't do a bonus 'hit-and-run'
Unfortunately, the short answer is definitely 'no'. You can't make him repay you his 13th cheque or bonus - even if it was a discretionary bonus. Even if he resigns the day after the money's in his account. Unless his employment contract and your bonus policy expressly makes provision for this.
So what steps can you take to make sure your employees can't grab the bonus money and run in future?
  1.  Include a clause in your employment contracts. It should say any bonus payable is to retain your employees' services. It isn't a retrospective reward.
    Where you pay employees a cost-to-company package, and you give them the choice to get their annual remuneration over 12 or 13 months, you can't make them pay back their 13th cheque. This is because it forms part of their annual remuneration package.
  2. Tell employees that if they resign within a certain time after getting a bonus they'll have to repay the entire bonus, or a pro-rata amount (whichever applies when they resign). This could be for three or six months.

Three more steps to make sure employees don't do a bonus 'hit-and-run'
  1. Your contract and bonus policy must clearly say that if an employee accepts his bonus, he automatically agrees for you to deduct any repayment amounts from his final salary if he resigns before the retention period ends.
  1. If a bonus is part of your employment contracts and you want to change your existing bonus rules, you have to consult with your employees and get their agreement first. If you give discretionary bonuses and they don't agree to the payback clause, you don't have to give bonuses. Rather link them to some other criteria and in launching this, make sure the payback clause is in the rules of the new bonus scheme. For example, performance or retention bonus.
  1. If you have complex bonus cases that you can't easily solve, you can carry on paying in the specific cases until the employee resigns or leaves the company. This special dispensation will then fall away without setting a standard for new employees. In this case, it's best to get expert advice before you go ahead with this.
So, as you pay out those bonuses and wish your staff well over the holiday season, make your own festive wish that none of your employees are planning to grab their bonuses and run!
Here's wishing you and yours a safe and restful festive season. May 2014 go down in your personal history book as one of the most prosperous and memorable ever.
Until next time (and next year)….
Warm regards

Janine Nieuwoudt
Editor-in-chief - Practical Guide to Human Resources Management

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