KPI and Bonus - Quick Legal Query

[lenny007]

Afternoon all,

My wife started a new job last May and part of her contract related to the payment of an annual bonus, dependent on agreed KPI's being met.

However, in the time between then and this July, no KPI's were issued to her, despite her asking for them to be. She even offered to write her own but this was declined as the management stated, rather reasonably, that if she did, she would write them in a way so that she would meet them with no issues and the company would be forced to pay them out.

Fast forward to this June and the bonus was not paid. The company is in the process of an equity company purchasing the majority of the shares and she was told by the FD that the finances of the company needed to be static during the due diligence phase.

This process and the purchase of the shares will be finalised on Monday.

My wife has been into the MD's office and reminded him of the non-payment of bonus and he said he would look at her contract. There is also the issue of another employee who is also awaiting their bonus and also a pay rise, again KPI dependent.

Since this July, KPI's have been issued to both of them so it is only the previous year that is the issue.

Question is therefore - if the company have not issued KPI's in order for my wife and her colleague to meet (in order to receive their bonus / pay rise), are they in breach of contract by not paying? Or, can they not pay the bonus / pay rise using the "no KPI's were met" excuse?

Thanks for reading and also thanks in advance for any advice offered.

[deckster]

What does her contract say?

[lenny007]

I've not got it in front of me but i believe it states "bonus paid dependent on agreed KPI's being met".

Looking at it written in front of me, they won't pay it will they? - as no KPI's were agreed. Despite them not issuing her with any...

[deckster]

Point being the exact wording is important and specifically whether it is a discretionary bonus or a contractual bonus.

Most bonuses are discretionary, which basically means that regardless of KPIs you may or may not have hit, payment is at the discretion of the company and you have no absolute right to receive them.

Without the exact wording, we are just guessing although either way, it's a stty thing for the company to do and personally I would putting it very strongly to them to sort it out or I would be considering my position very carefully.

[haventahybrid]

lenny007 said:

I've not got it in front of me but i believe it states "bonus paid dependent on agreed KPI's being met".

Looking at it written in front of me, they won't pay it will they? - as no KPI's were agreed. Despite them not issuing her with any...

Under the clause relating to your wife's bonus scheme I would be surprised if there was not an additional clause below stating that the company has the right to suspend, modify, reduce or withdraw any bonus scheme / payment no matter how the incentive plan is governed. That is usually the case.

[lenny007]

deckster said:

Point being the exact wording is important and specifically whether it is a discretionary bonus or a contractual bonus.

Most bonuses are discretionary, which basically means that regardless of KPIs you may or may not have hit, payment is at the discretion of the company and you have no absolute right to receive them.

Without the exact wording, we are just guessing although either way, it's a stty thing for the company to do and personally I would putting it very strongly to them to sort it out or I would be considering my position very carefully.

Firstly, thanks for replying and for your help - appreciate it.

I've actually managed to find a copy of her contract and regarding the bonus it states

" the employee will have the potential to receive a bonus of up to £5000 per annum, payable upon achieving agreed KPI's".

Nothing about discretionary or contractual.

It does, however, state;

"at the company's discretion, your salary will be reviewed annually in November. You should be aware the a salary review will not necessarily result in a salary increase".

which specifically states the salary increase is discretionary.

So pay rise is discretionary and bonus is contractual?

[deckster]

lenny007 said:

..." the employee will have the potential to receive a bonus of up to £5000 per annum, payable upon achieving agreed KPI's".

...bonus is contractual?

I've bolded the appropriate words. I would read it as saying that there is a potential to receive a bonus, which if it's paid would depend on achieving KPIs. Potential is not a word indicating that there is a contractual obligation for it to be paid.

Contractual bonuses are typically a feature of sales and commission-based jobs (you will receive 10% of sales or you will be paid X if you sell Y), and the above doesn't sound like it fits the bill I'm afraid.

As I said, nothing changes the fact that it's a stty way to be treated by the company.

[lenny007]

haventahybrid said:

Under the clause relating to your wife's bonus scheme I would be surprised if there was not an additional clause below stating that the company has the right to suspend, modify, reduce or withdraw any bonus scheme / payment no matter how the incentive plan is governed. That is usually the case.

It actually doesn't. The only thing regarding deductions is;

"the company is authorised to deduct any sums due to it from your salary".

[lenny007]

deckster said:

I've bolded the appropriate words. I would read it as saying that there is a potential to receive a bonus, which if it's paid would depend on achieving KPIs. Potential is not a word indicating that there is a contractual obligation for it to be paid.

Contractual bonuses are typically a feature of sales and commission-based jobs (you will receive 10% of sales or you will be paid X if you sell Y), and the above doesn't sound like it fits the bill I'm afraid.

As I said, nothing changes the fact that it's a stty way to be treated by the company.

Pretty much what i thought to be honest. It is a stty way to be treat, especially since the new MD is my wife's friends Husband and our two sons are good friends.

If they don't pay this, i can't see that friendship surviving long term...

[eybic]

Surely what matters is the black and white of it. She hasn't met KPI's so I wouldn't imagine it's payable, whether they set them or not won't have much to do with it IMHO, they don't say we WILL set you KPI's.

As has been said, it's pretty stty of them though.

[haventahybrid]

That is one sure fire way to demotivate a staff member. Given the fact that your wife's friend is married to the MD it makes it even more frustrating but contractually looks like your wife is up the proverbial creek

[lenny007]

eybic said:

Surely what matters is the black and white of it. She hasn't met KPI's so I wouldn't imagine it's payable, whether they set them or not won't have much to do with it IMHO, they don't say we WILL set you KPI's.

As has been said, it's pretty stty of them though.

Yup, i agree with you. It's the black and white which matters. It does rather beg the question that if a discretionary bonus is offered, no KPI's set, you offer to write your own KPI's and that's refused, what IS the the point of offering it in the first place?

It will be very interesting to see if my wife's colleague receives a bonus however, bearing in mind hers is a fraction of my wife's and it is also KPI dependent...