There are a number of reasons why your employer might introduce this type of pay scheme. They may:
• be keen to Q1 retain current staff
• want to compete for new talent
• be seeking a fairer way of distributing wages.
In order for performance-related schemes to work, they should be based on clear, measurable Q2 targeted agreed by both employer and employee. You will normally find out about these targets from your contract of employment and the performance appraisal meetings you have with your manager.
Short-term schemes usually offer bonus payments, or, depending on the type of work, Q3 commission on sales achieved. Payments vary and these schemes are normally used just to encourage staff to improve their own performance.
Long-term schemes offer rewards like share options, and can help to encourage loyalty to the organisation and its aims. Such schemes tend to be used as a way of retaining Q4 senior staff.
What to do if you have problems
If you don’t receive bonus or commission payments which you believe you are owed, check your contract of employment or staff handbook to see how your bonus is paid.
Ask your employer if you need more information.
If you think a mistake has been made, you should:
• speak to your employer to see if there has been a misunderstanding
• ask your employer to set out in writing how they have calculated your pay
• keep copies of any letters and notes of any Q5 meetings.
There are three ways that the law might cover a case of unpaid bonuses:
• breach of contract
• unlawful deductions from wages
• unlawful discrimination.
Deductions from wages / breach of contract
Any right to a bonus will normally be included in your contract of employment. It may not always be written down. It can be verbally agreed or understood to be there due to normal practice in your particular area of business.
Failure to pay a bonus or commission that you are entitled to could amount to an unlawful deduction of wages.
Your employer must not discriminate against particular groups of people – for example, by giving smaller bonuses to Q6 women. Ideally your employer should have some guidelines setting out the normal range of bonuses to give, and these must be followed without discriminating against any specific group.