While many employers will experience their busiest period of the year in the lead-up to, or during, the festive season, other employers will instead take the opportunity to close their businesses for a few days. Given the recent discovery of the new COVID-19 variant in South Africa, some employers may also be reconsidering their business plans for the festive season as the 4th wave grows momentum whilst weighing up the pros and cons of a festive season shutdown.

Most employers may have had plans for economic recovery during this festive period as businesses are faced with a competitive environment, being tempted to stay open during this festive season, especially given the pressure on businesses and the South African economy that the lockdown restrictions and Covid-19 have created. However, some time off at the end of the year could also be well needed. While there are disadvantages of shutting down a business during the festive period, there are also certain advantages.

Some of these advantages may include – Improving productivity, saving on overhead costs, improving morale, and preventing and recovering from burnout. In contrast, some disadvantages may include – Loss of income from not operating, possible missed opportunities, and the situation where certain employees may not have enough annual leave available and must then take unpaid leave during the festive shutdown. Various businesses may also operate on “skeleton staff” during the festive season – incorporating a “best-of-both” approach.

When it comes to the provision of benefits during the end of year period, the two most common benefits that come to mind are annual leave and a bonus.

Annual Leave:
Each business should have its own annual leave policy that sets out the rules regarding how and when annual leave may be taken. This is usually included in an employee’s employment contract as many employers have a shutdown period over December. If this is the case, an employer may stipulate that annual leave must be taken to coincide with the business’s shutdown period. Should an employee use their annual leave at another time during the year, then the shutdown period will be treated as unpaid leave, and the employee will not be paid for those days. Section 20(10) of the Basic Conditions of Employment Act also stipulates that the employee and the employer must agree on when annual leave can be taken. If there is no agreement, then annual leave is taken at the time that suits the employer.

The provision of a bonus:
COVID-19 has caused a detrimental financial impact on most businesses in South Africa. Employers may have been forced to implement drastic measures to avoid permanent business closure, including reducing salaries, short-time work, or even retrenchment.

Another measure which employers may consider is the non-payment of bonuses. As the year draws to its end, the expectation and/or practice of bonus season also arrives for many businesses. Due to a financially straining year for many employers, the consideration of not paying bonuses becomes a reality for businesses. Even though it may sound unreasonable to expect a bonus in these difficult times, some employers may be contractually bound to pay bonuses to their employees, whilst other employers may exercise their discretion in paying bonuses, depending on the circumstances.

South Africa Labour Legislation does not regulate the payment of bonuses. An employee is not automatically entitled to receive a bonus unless it is agreed to in writing in the contract of employment or if provision is made in relevant Bargaining Council’s Main Agreement.

In circumstances where some employers consistently pay bonuses to employees each year, without providing for such an agreed bonus in their contract of employment – employers should consider that consistently paying bonuses creates an expectation. Employees who have an expectation of receiving bonuses and for whatever reason do not – this may result in the employees referring an unfair labour practice dispute in terms of Section 186(2)(a) of the Labour Relations Act, regarding benefits, to the CCMA or Bargaining Council.

Although creating a reasonable expectation to pay bonuses may put a constructive obligation on employers to continue to pay the same, it does not automatically entitle an employee to a bonus. Employers who have paid bonuses each year should give their employees sufficient notice that they will not receive a bonus and consult with the affected employees timeously, giving reasons why bonuses will not be payable.

Even if the employees do not agree during the consultation to non-payment of bonuses, an employer may, in certain instances, implement the non-payment of same if it has a valid, reasonable, and fair reason for doing so.

In South African Commercial, Catering and Allied Workers Union obo Skosana and others v Triptra (Pty) Ltd t/a Denneboom Station Pick and Pay [2013] 9 BALR 993 (CCMA), the employer halted payments of bonuses to which employees were contractually entitled to, as a means of preventing retrenchments. The Court held that even though the dispute fell within Section 186(2)(a) of the Labour Relations Act, the employer’s refusal to pay such bonuses was not unfair as it was based on the employer’s financial constraints.

In certain instances, bonuses may also be considered discretionary – where contracts of employment, or company policies, refer to a certain standard or obligation that needs to be met before employees qualify for a bonus which is subject to an employer’s discretion.

However, employers should tread lightly when it comes to discretion. In the matter of Aucamp v SA Revenue Services (2014) 35 ILJ 1217 (LC), the Labour Court held that if an employer exercises their discretion unfairly in terms of paying bonuses, it constitutes an unfair labour practice.

Employers should also note that they are contractually bound to the terms of a contract of employment and that they are obligated to pay bonuses unless the bonus policy/clause requires an employer to exercise their discretion.

Employers are also bound to pay bonuses in terms of the relevant Bargaining Council Main Agreement. However, where an employer’s discretion is required, the same should then be exercised in a fair and reasonable manner, ensuring that such discretion is justifiable and, for a good reason, should a dispute be referred to the CCMA or Bargaining Council.

Article by: Carl Ranger
Dispute Resolution Official – Bloemfontein