Work Bonuses: Is Everyone Entitled?

Whether you are entitled to a bonus depends a great deal on your employment contract. If you do not have an employment contract, then a bonus is likely at the discretion of your employer. Many employers announce bonuses as an incentive, believing that the increased production will compensate them for the amount of the bonus.

What is a bonus?

A bonus is normally an addition to your salary in either the form of money or product that is beyond what is usually expected. Many retail employers offer their employees a discount on store products as an employment incentive and then sweeten the percentage for high-performers.

Is everyone entitled to the bonus?

It depends on what kind of bonus is being given to determine who is entitled. Some bonuses are awarded merely as a “thank you” by the employer. Not everyone is entitled to this type of bonus, as they are purely discretionary and the employer can decide who will get the bonus. These bonuses are not going to be contracted anywhere or promised to employees in employee handbooks.

However, some bonuses are based on an employee’s sales or commission. Such bonuses are entitled to employees who met a certain standard of performance. A good example of a bonus such as this is a realtor working for a real estate agency. Often, realtors earn an annual bonus based on their sales. However, preconditions often set the employer up for lawsuits if the terminated worker was a part of the success in the precondition. Let’s say an employee is terminated the week prior to the date set for an incentive bonus. If the company exceeded the standard set, the terminated employee is likely entitled to the bonus as they were a part of the workforce or management that helped exceed the standard. Additionally, an employee who was with the company all but a short period before an annual bonus or holiday bonus is given, is also likely eligible to receive the bonus. Historically, the courts have ruled in favor of terminated employees that met the precondition for the bonus.

Is everyone entitled to the same bonus?

It can sometimes be difficult for an employee if they know others are receiving bonuses or compensation for their hard work, and they are not. Or if they are receiving bonuses that are not the same amount as other employees. Usually, bonuses or raises are confidential, but employees get excited about a bonus or raise and often want to share their excitement with their co-workers. Should an employer be fair when it comes to bonuses and award every individual the same?

Many employers believe that a bonus should be an incentive and not a participation trophy. Their rationale could be, “You did not do anything more than come to work every day and put in the hours, why should I give you a bonus for that? A bonus should be given for attaining a measurable standard, if you did not reach that standard then you don’t deserve additional pay. Step up your production and get one next time.”

How do bonuses affect the new overtime rule for salaried employees?

The Final Rule for overtime for salaried workers is set to take effect December 1, 2016. At that time, employers will be permitted to use up to 10 percent of an employee’s standard salary with incentive payments and non-discretionary bonuses, to include commissions to fulfill the $913 prescribed salary level. The incentive payments and non-discretionary bonuses are types of promised compensation, such as a tenure or loyalty bonus or a preannounced bonus for performance. Any bonus written into an employment contract or employee handbook is non-discretionary.

On the other hand, a discretionary bonus is one that is awarded by the employer that had no preannounced conditions. For example, the employer is happy about a surge in production during the previous quarter and decided to give everyone a bonus. That was at his/her discretion to do so. This amount of bonus could not be used to fulfill any part of the $913 prescribed salary level. Therefore, an unannounced year-end bonus is discretionary.

The bottom line about bonuses

If a bonus is promised in an employment contract or employee handbook and the standard was met, then everyone who helped meet the standard is entitled. If it is an announced holiday or year-end bonus, everyone stipulated by management is entitled. Many courts have ruled that personnel employed for most the year are entitled to year-end bonuses. Non-discretionary bonuses are given as announced; discretionary bonuses are at the discretion of management.