Upfront, there is no rule or legal requirement that states an employer should pay a bonus of any sort.
There are two circumstances under which a bonus MUST be paid:
- It has been stated in the employment contract that a certain amount will be paid as a bonus (i.e. a 13th cheque, 50% of monthly salary etc.)
- If in the past a bonus has been paid on a regular basis (for example if you have paid your domestic worker a bonus every year since they started working for you), then it becomes what is known as an “established practice” and the “reasonable expectation” has been created that a bonus will be received. Even if it is not stipulated in the contract, under this condition the employer can be ordered by the CCMA to pay a bonus if it has been withheld.
What do you do if you previously paid a bonus, but are no longer in a financial position to pay it again the next year?
As soon as you realize you wont have the money to pay the bonus, let your employee know! The sooner the better, DO NOT wait until the very end of the period when the bonus is due, to break the news. When a bonus has been promised, or is reasonably expected, employees do budget on this money for certain expenses, so not receiving it can have severe consequences. As the employer it is your responsibility to mitigate the effects on the employee not receiving the bonus, and the best way to do so is to give them as much warning as possible. It is best to give written notice of the fact, and let the employee know if they will be receiving a portion of the bonus or nothing at all.
How to safeguard yourself?
The best way to safeguard yourself as an employer is to have a signed employment contract with your employee, with a clause stating the following:
” A payment of an annual bonus is not a condition of employment but shall be subject to the sole discretion of the employer and dependent on performance.”
With this clause you have the flexibility to pay the bonus when the employee is deserving and you have the finances available, but to withhold it if the employee has shown poor work performance, or finances do not allow. However, do remember that even WITH this clause, if you do pay a bonus for several years in a row you will be creating the “reasonable expectation” that an annual bonus will be paid, and therefore must still notify your employee well in advance if there is a year that they will not receive it.
Each case is unique, should you need further advice or assistance in drawing up an employment contract for your domestic worker, please contact Sam at [email protected]