This has been a difficult year for everyone and now more than ever, employers are struggling to not only maintain their staff compliment but pay staff additional extras such as bonuses. The payment of bonuses, especially the 13th cheque or year-end bonuses, has always been quite a controversial issue because the majority of employees assume that it is something that they are automatically entitled to.
The terms bonus and 13th cheque are usually used interchangeably, however, these concepts are quite different. A 13th cheque is a bonus that the employee can expect every year if this forms part of their employment contract. A bonus, on the other hand is a reward based on the employee’s performance and the performance of the business. This differentiation is usually made clear in an employee’s contract of employment. However, where an employment contract is silent on the payment of a bonus, then the issue is subject to the discretion of the employer to decide and negotiate with employees whether or not a bonus is to be paid.
There is no provision in the Basic Conditions of Employment Act which compels an employer to pay bonuses of any sort. This means that if an employer who presently does not pay bonuses wishes to continue not paying bonuses, they can continue not paying, without fear of being accused of an unfair labour practice. However, the position is different where the employer has previously paid bonuses to its employees, as the employees have a reasonable expectation that the employer will continue paying the bonuses as it has done in the past. Those employees have now come to expect the payment of the bonus as a right or entitlement.
The South African Labour Guide states that in the case of employers who now wish to change the status quo regarding payment of bonuses, either by paying less, paying at a different time of the year, splitting what was an annual bonus into two separate payments, or discontinuing such payments completely, will have to consult with the employees, explain the problems, and try to get them to accept the new system that they wish to implement.
Such changes constitute a change to the employees’ terms and conditions of employment and therefore, cannot be done unilaterally and must be negotiated with the employees. Should the employer fail to negotiate the changes that they wish to implement, it could lead to claims of unfair labour practices from the affected employees against the employer.
The Courts have previously found that employers should consult employees on this issue well in advance. Employers cannot, therefore, expect to inform employees 2 weeks before their bonuses are due that they will not be receiving bonuses or of the changes made to their bonuses. Courts have previously deemed such conduct by employers to be unfair labour practices.
If after negotiations, the employees refuse to accept the proposed changes, the employer can proceed to implement the changes, if it has good sound and reasonable commercial rationale for making the changes. Employees who are disgruntled by the decision will be able to refer an unfair labour dispute and will bear the onus of proving that the decision made by the employer was unfair.
Due to the fact that bonuses are such a controversial issue, it is essential that the terms and conditions applicable to the payment of bonuses must be specifically and clearly stated in the employment contract, even to the extent that a company does not pay bonuses of any sort.
Article by: Jodi-Leigh Erasmus
Dispute Resolution Official – Port Elizabeth