Hi Guys,

I received this Labour advice today and thought I would share it......

The end of the year is looming and here at FSP we notice certain labour issues start to “trend”.


Around this time of year employers seem to face the same seasonal problems i.e. abuse of sick leave, bonus issues and performance reviews.

We had a very interesting question at our Help Desk this week dealing with bonuses and what the requirements around it are. See the question below and what our experts had to say:

Question


We run a cleaning company and fall under the Sectoral Determination: Contract Cleaning Sector.  According to what I’ve heard- it’s compulsory for us to pay bonuses in December equal to “4 weeks of an employee’s weekly wage”.
 
BUT according to the “Labour Law for Managers” publication, it’s stated under Employment contracts: all the basics- that “bonuses can be discretionary or guaranteed …. “
 
We follow a strict rule when it comes to employee wages and always pay according to Sectoral Determination wage demands.  We’ve paid bonuses in the past as far as we could manage.
 
Unfortunately we’re currently in a situation where we lost THREE MAJOR contracts over the past year and haven’t been able to replace them with new substantial contracts. We’re in a financial crisis at the moment and simply don’t have the funds available (between R80 000 to R100 000) to pay bonuses.
 
We currently still have an estimated 70 employees on sites and struggle to keep them all paid AND still employed.
 
Please can you advise us on what to do?

 


Answer

There’s no statutory requirement in labour law to pay bonuses of any sort, and any payments made aren’t regulated by labour legislation. The important thing to note here is the declaration of bonus payments by the employer is a contractual issue and not a labour law issue.

Employers should note that bonuses must be paid where:

 

    * a bonus is a contractual condition embodied in the employee’s contract of employment; or
    * a contractual condition embodied in a company policy; or
    * the payment of the bonus has become a condition of employment through established practice; or
    * payment of a bonus has become a condition of employment through a Sectoral Determination.


 A unilateral failure to pay the bonus may amount to an unfair labour practice (section 186 and also section 191 of the Labour Relations Act). It may also be seen as a unilateral change to the employee’s terms and conditions of employment, or as a breach of contract. In this case the employee would be entitled to sue for damages, or (more likely) would sue for specific performance.

Your next step would be to share the operational circumstances with the affected employees, explaining to them the financial predicament.  Through consultation and creative alternatives, solutions can be brainstormed.

For example agreeing to pay out the bonuses (or part thereof) as soon as the company is in a position to afford it; or paying the bonuses in installments.

If the consultations fail, the employees can apply to the Labour or Civil Courts for a specific performance order based on breach of contract.  The employees should be informed that a claim of this nature could lead to the liquidation of the company.

Long term, we suggest that you restructure the company in terms of section 189 of the Labour Relations Act.


3 Tips to safe-guard yourself when dealing with bonuses

 

    * Never make the payment of bonuses a condition of employment
    * Rather have a company policy detailing when bonuses will/won’t be paid
    * Link pay with performance


5 reasons to spend money on bonuses
The key reasons you should pay bonuses are to:

 

    * Motivate your current employees;
    * Make your company attractive to potential employees;
    * Make sure skilled and valuable employees stay at your company; and
    * Be competitive in terms of remuneration and benefits when compared to other employers.