When a thirteenth cheque becomes a burden

Who doesn’t like a fat pay cheque to tide them over until January? It is common knowledge that bank balances tend to shrink from the first of December, with many people entering January running on fumes…Hence the tradition of a “thirteenth cheque”…a yearly bonus to cover all those festive season eventualities.

BUT, what happens when that bonus becomes a burden to you as employer?

When is a bonus mandatory?

If the payment of a year-end bonus, (the thirteenth cheque), is written into the employment contract without provision being made for it to be withheld, then it must be paid out.

“…Where a bonus is a contractual condition embodied in the employee’s contract of employment, or a contractual condition embodied in a Company Policy, or where the payment of the bonus has become a condition of employment through established practice, then the bonus must be paid.  A unilateral failure to pay the bonus may amount to an unfair labour practice (section 186 and also section 191 of the Labour Relations Act).”

When can a bonus be withheld?

If however it has simply been paid periodically as an ex-gratia payment based on production performance, there is wiggle room for the employer.

Approach the subject carefully.

The key factor to remember is that fair warning must be given to employees of the intention not to pay bonuses.

“It is certainly unfair of the employer to decide unilaterally not to pay bonuses, and in addition to either not advise the employee at all, or advise the employee at the last possible minute…

…It cannot be accepted, by any stretch of the imagination, that an employer suddenly discovers only on shut-down day that Company profitability disallows the payment of bonuses for this year, or he suddenly discovers on shut-down day that employees have not been performing and therefore the payment of bonuses this year is not justified and so on.”

Withholding bonuses can often be a necessity based on performance or commercial viability.

As an employer it is your right to withhold discretionary bonuses if you approach it carefully. Don’t simply refuse to pay the thirteenth cheque without proper discussion and communication.

Otherwise, your decision might come back to bite you in the new year!

For more resources on this subject, visit Labour Guide