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Six things regarding bonus payments you must clarify in your employee's contract

by , 05 November 2014
It's that time of year again where end of year bonuses are at the top of the agenda for companies who give employees such payments.

When all is said and done, what we often find is disputes between employers and employees arise about bonuses.

To avoid the same fate, make sure you clarify the following six things in your employee's contract regarding bonus payments.


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Six things you must clarify in your employee's contract regarding bonus payments

 
There are three types of bonuses you can pay.
 
In this article, we explain that you can pay a:
 
  • Discretionary bonus – Whether or not you pay this type of bonus is entirely at your discretion
  • Performance bonus – You base this bonus on individual or company performance, or both.
  • Guaranteed bonuses – You pay this bonus irrespective of individual or company performance (thirteenth check).
 
When it comes to bonuses, you must clarify these six things in your employee's employment contract:
 
#1: The exact circumstances under which you'll pay the bonus.
 
#2: Whether you'll pay the bonus pro rata (a portion of his remuneration).
 
#3: Whether your employee must still be in your employment on the date the bonus will be paid.
 
#4: Under what circumstances your employee will forfeit his bonus (for example, excessive absenteeism or dismissal for misconduct).
 
#5: Bonuses are at your discretion and employees don't have an automatic right to a bonus.
 
#6: Past practice doesn't constitute a right to future bonus payments.
 
Clarifying these six things in your employee's contract will help ensure you handle bonus payments effectively and most importantly, avoid disputes with your employees.
 
PS: For more information on how to handle bonuses effectively, check out the Labour Law for Managers Loose Leaf Service. The Loose Leaf Service also gives you all the details you need for maximum protection in labour-related problems.


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