13th CHEQUES: MUST YOU PAY AN ANNUAL BONUS?

November has rolled around again, and with it comes the normal slew of annual bonus questions and complaints like: “My business is struggling. Must I pay Christmas bonuses this year?” and “I haven’t been given a bonus this year – what are my rights?”

To start with, nothing in our labour laws gives employees any automatic right to 13th cheques or bonuses, so to answer these questions have a look at your employment contracts, company policies and (if applicable) collective agreements. Are your employees guaranteed a bonus? Are conditions specified (profitability of business, employee performance or contribution etc)? Is the boss given unlimited discretion in deciding?

Note that even where nothing has actually been agreed, you need to tread carefully if you have regularly paid annual bonuses in the past. This is because departing from any established practice without employee consultation can be seen as an unfair labour practice. The dictates of labour law aside, employee morale is going to dive if expectations of a bonus have been built up over the years but are then shattered at short notice.
What about fixed term employees?

A recent Bargaining Council arbitration decision held that where a municipality had a practice of paying 13th cheques to all its other employees, it was unfair for it to refuse the same to a fixed term employee. Be careful generally of differentiating between employees performing the same or similar work.
Employees: A final thought

Remember the taxman will take a sizeable slice out of your bonus – often more than you expect. And before you begin to mentally spend what’s left on some festive season high-living, read “Warning: don't blow that bonus” on IOL website.

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