Bonus discrimination & The Risks Associated With It

Bonuses usually fall into one of two camps – those that are based on individual performance and those that are paid to everyone in the company, regardless of any other factors.

The risk of bonus discrimination

A bonus that is based on the way an individual employee performs may be directly related to the amount of income or business that person creates within the company they work for. However, there are certain steps that an employer could take that might stop someone from achieving the standard that is required to be awarded a bonus – for example ensuring an employee is not invited to certain events or meetings. If this treatment is meted out by an employer and is based on an employee’s sex, race, religion, age, sexual orientation, marriage, pregnancy or maternity, civil partnership, gender reassignment or disability – and the employee either receives no bonus or a bonus that is less than another employee in a similar position receives – then the Equality Act 2010 allows an employee to make a claim for discrimination.

The right to claim for bonus discrimination is most often exercised by women who have received a lower bonus than a man doing the same job. If there is no reasonable explanation for paying a woman less than a man then this amounts to direct discrimination. In many cases, companies do not keep written records of the decision making process behind bonuses being given, but not doing this can cause considerable problems if problems do ever arise, as there is then no explanation as to why a woman was given less than a man.

Where a woman has been awarded less of a bonus than a male colleague, because of being pregnant or on maternity leave then this will also be direct discrimination and there is no need for the woman to establish a male person of comparison.

Where an employee is on, or has had, an absence as a result of maternity leave an employer may sometimes seek to pay that employee a lower bonus as a result. This will be acceptable where the conditions for receiving a bonus depend on company performance or the way that individual performs over a certain period (as long as the bonus is contractual). In this case, the employer can pay the bonus on a pro rata’d absence basis, although the period of maternity leave that is compulsory (two weeks after the baby is born) should not be treated as absence. A discretionary, contractual retention bonus or award for service that amounts to less for one employee as a result of her maternity absence could give rise to a claim for sex discrimination. Most cases tend to be different and will depend very much on the circumstances.

The Equality Act 2010 protects both younger and older workers against age discrimination. Length of service bonuses can present a problem where the bonus is received after an employee has been at the company for a certain length of time. This is because older employees are most likely to meet this standard, making such a condition indirectly discriminatory against younger workers. This will not be the case where the bonus is fixed and earned by five years service or less. If more than five years service is required, the bonus payment must be justifiable as means to foster loyalty in employees, to motivate, to reflect a higher level of experience an employee has, or to achieve other legitimate business aims by the employer.

Bonuses paid to a worker of a certain age, but not to another of a different age, mean the worker who does not receive the bonus could claim for discrimination, unless an employer can show that the difference is a ‘proportionate means of achieving a legitimate aim.’