As the festive holidays unfold, the issue of Christmas bonuses becomes a subject that confuses most people. Both employers and employees are usually confused on the subject and begin to sort out whether the employers are to pay a Christmas bonus or not.
What is a Christmas bonus? As the name implies, it’s one-time payment employees receive in addition to their normal salary during the Christmas period. Employers that can afford to pay Christmas bonuses may use them to encourage their employees. Christmas bonuses help to improve staff morale by allowing them to have a little more to spend during this time of the year. It could also represent a lucrative incentive for employee retention.
Must employers pay a Christmas bonus?
The answer depends on a whole lot of facts. First, a Christmas bonus will depend on the contract of employment which outlines the type of relationship that exists between the employer and the employee in writing. Other facts to consider include the employee handbooks and job appointment letters.
It is safe to assume that employers must pay Christmas bonuses if the contract of employment states it categorically that the employee will receive a bonus at Christmas since the contract bounds the parties. For instance, if a company’s employment contract says the employees will be paid the equivalent of one week’s salary before Christmas, then the employees will be expecting to receive the exact amount every 24th of December.
What if the contract does not specify
Employees will refer to their handbook and company policies for any information about Christmas bonuses. Employers may include a policy that approves the payment of a Christmas bonus under certain conditions, such as if the business meets its target for the year or if the employee meets or go beyond some targets.
However, employers can use their discretion to pay the bonus or not in a situation where the handbook or policies do not specify any whether the company will pay bonuses during Christmas or not. But employers must be careful when dealing with bonuses referred to in any policies or employee handbook to ensure that the bonus is not contractual, but discretionary.
In the covering letter or offer letter, employers may also state that discretionary bonus may be paid at Christmas, without including such in documentation or employment contracts. This allows the employer to decide whether to pay for a bonus or not.
When there is no document on employee Christmas bonuses
Employers can consider its previous tradition if there is no form of documentation on Christmas bonus. Employers that have been consistent in paying Christmas bonuses are not obliged to do so. But if the employer has been giving employees a certain amount as a bonus every Christmas for a long period, anyone can argue that the practice has not become a contractual entitlement. You may need to consult a lawyer if you have doubts to avoid pitfalls.
However, employers can clarify their stand on Christmas bonuses in paperwork to ensure that they are not obliged to pay its employees Christmas bonuses.