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Here's what to do if you can't afford to pay a bonus this year

by , 14 February 2013
Absa has just presented its full-year earnings. While it's promised to return some excess capital to shareholders as a special dividend, the bank's seen a decline in earnings. That's why CEO Maria Ramos has made a bold move regarding bonuses in the bank - she and her executive staff aren'tgetting one. This sets a great example for other business leaders. If your employment contracts make it a contractual obligation to pay a bonus, there's a simple way to protect yourself if you fall on hard times financially and suddenly can't afford to pay a bonus...

ABSA's CEO Maria Ramos won't receive a bonus this year, reports iAfrica's Business.
 
That's because in the year to end December 2012, bonus payments at the banking group declined 23% compared to the year before.
 
 
Because Ramos holds herself accountable, she's taking a knock and saying she can't afford to pay a bonus to herself this year.
 
Ramos is setting a great example, especially as many local businesses are under similar pressure and simply can't afford to pay a bonus.
 
Luckily, you're not obliged to pay a bonus to your staff, no matter how well they've performed, unless it's in your employees' contracts, says The Labour Bulletin
 
 
You'll have to pay staff a bonus if it's written into their employment contracts
 
You'll only be obliged to pay a bonus to employees in the following conditions:
 
1. Where the bonus is a contractual condition, meaning it's embodied in theiremployment contracts; or
2. If it's a contractual condition embodied in a company policy; or
3. If the bonuspayment has become a condition of employment through established practice; or
4. If payment of a bonus has become a condition of employment through a sectoral determination.
 
But if bonuses are dealt in one of these ways in your company, and you can't afford to pay them,all's not lost.
 
You can take action to prevent an employee from suing you for damages if you can't afford to pay a bonusby explaining the company's financial predicament to your employees.
 
You can then brainstorm creative alternatives that'll keep all parties happy.
 
Two ways to keep your employees from suing you if you can't afford to pay a bonus
 
1. You can agree to pay a bonus as soon as the company is in a position to afford it.
2. You can agree to pay a bonus in instalments.
 
And you can protect yourself from this embarrassing business situation in future by linking pay with performance instead of having it as a condition of employment that's written in their employment contracts.
 
That way you'll motivate staff to be perform better throughout the year, and still not be legally obliged to pay a bonus if your business finances take a nasty turn.

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