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Perks of the job: The onuses of employee bonuses

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“I’m afraid that there’s no one in the office at present; they’re all off to Ibiza”. It may sound unlikely, but such a response is becoming increasingly plausible as employers strive to find new and exciting ways of attracting and incentivising staff through the use of perks. And, yes, a trip to sunny Ibiza is genuinely available to top performers at one particular business. Howard Robson, Employment Partner, reviews here the range of benefits that employers are starting to introduce in the name of employee retention, and advises what those employers should do in terms of a paper trail.

Other unusual staff perks include onsite Helter Skelters, workplace music festivals, in-house pubs and concierge services. And the list goes on. There are numerous ways to keep employees happy. And, whether you’re a small business or a large enterprise, you could be rewarded with greater loyalty and productivity. After all, the success of any business is dependent upon its ability to recruit, retain and motivate good staff.

While larger companies have long offered significant corporate perks, many smaller businesses are now providing a selection of enticing benefits that are having positive results. But whatever the size of your business, it is vital that legal implications, including employment law considerations, are taken into account in the design and implementation of incentive arrangements.

A number of employers have, for example, begun to offer unlimited annual leave. Whilst this may sound like an inspired plan (one-way ticket to Rio, anyone?), it could give rise to legal pitfalls. Aside from the practical issue of ensuring that adequate holiday cover is in place, it is arguable that unlimited annual leave may result in staff taking less time off as they struggle to decide just how much leave is appropriate in the absence of limits, or feel pressure to stay at work. Employers would, therefore, need to be careful to ensure that they fulfil their obligation to permit staff to take the statutory minimum annual leave in accordance with the Working Time Regulations 1998. Such a perk could also cause complications when calculating holiday accrued whilst on sick leave or maternity leave.

Other employers offer incentives such as prize draws for staff attendance. However, this too could give rise to legal issues, with the potential for such incentives to be viewed as discriminatory, particularly if an employee’s medical condition or maternity leave has contributed to them not receiving the benefit.

Many employers choose to incentivise staff by expanding upon existing statutory rights, whether this be by offering additional holiday entitlement, enhanced maternity/paternity leave or flexible working hours. Whatever the additional benefit offered, employers should ensure that policies are clearly drafted, effectively communicated and transparent. Informal policies leading to inconsistencies and inequities are often the cause of subsequent legal disputes.

One of the key effects of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) is the protection of employees’ terms and conditions following the transfer of a business. What, then, are the obligations of a transferee employer in relation to provision of employee perks? Where an employee has a contractual right to a benefit, the transferee will be required to continue to provide it. To do otherwise might give rise to a claim for breach of contract or, where the employee resigns, a claim for constructive dismissal.

In some situations, employees may be contractually entitled to a benefit, but the employer may reserve discretion as to its scope or terms. An example of this would be private medical insurance, where an employee may have a contractual right to participate in the scheme but the employer may reserve discretion as to the scope of cover provided. However, employers ought to ensure that the exercise of such discretion does not lead to discrimination claims.

Employees might also enjoy non­-contractual perks. Where benefits are wholly discretionary, the transferee will not be obliged to continue to provide them. However, caution should be exercised when withdrawing discretionary benefits due to the possibility of a breach of the implied mutual duty of trust and confidence. There is also the possibility that a discretionary benefit may have become contractual through custom and practice.

So, what now? Immediately dispense with all staff perks on the basis of the potential risk that they might pose? Absolutely not. Employee incentives are a tried and tested method of improving staff morale and productivity. We simply suggest that you fully explore the potential legal implications of staff benefits and take these into account when designing, implementing and amending employee incentive schemes.

If you’d like advice on introducing staff benefits into your handbooks, employment contracts and policies, contact Howard or the Employment Team on 02380 717717 or visit their section of the website here.


This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.