Employers try a variety of incentives to find creative and reliable ways to motivate their employees. Employers with vast interest and belief in their businesses are often inspired by passion and the entrepreneurial spirit to work harder each day. But, unfortunately, the same cannot always be said about their employees.

Employment incentives at times have proven to improve the morale, motivation and productivity of employees. One of these incentives is through bonus payments. Bonus payment may be described as an additional payment by the employer to the employee on top of their regular earnings. Unfortunately, during these COVID-19 and lockdown times, many employers could not provide bonus payment to their employees. Unfortunately, this has led to some frustrations for many employees due to their consistent expectations of bonus payment.

Discretionary versus nondiscretionary bonus payment

Many employers and employees are not aware that there are two types of bonus payments: discretionary bonus payment and nondiscretionary bonus payment. The fundamental differences between these two are colossal. Some employers offer three types of bonus payments to the employees: the 13th cheque bonus pay, the performance bonus, and the production bonus.

Discretionary bonus payment

Essentially, the 13th cheque is paid by the employer to an employee as gratitude for a job well done. Therefore, it remains the sole discretion of the employer whether to pay this incentive to their employees.

Contrary to popular belief, South African Labour Law makes no provision for paying bonus pay to an employee. Therefore, employees do not have a right in terms of our Labour Laws to a bonus payment.

In these circumstances, it is only granted when employers exercise their discretion, taking into consideration the employee's good performance, target and quality production or increase in employer's revenue or, in some instances, employees make representations to justify why they should receive bonus pay.

Non-discretionary bonus payment

In the circumstances of nondiscretionary bonus payment, the employer does not need to provide the employee with an opportunity to make representations of why the employee should receive bonus pay. However, this bonus payment may be specified in an employment contract or other documentation.

Regarding this bonus payment, in the circumstances where an employee does not receive it, the employee has the right to declare a dispute against the employer for unpaid monies. Failure or refusal by the employer to pay this bonus payment will result in the repudiation of the agreement.

Conclusion

Considering the above, employers must ensure that they must clarify to their employees which type of bonus payment applies to avoid any confusion and unnecessary disputes and costly litigation. Furthermore, employers must be cautioned against repudiating any agreement terms without first consulting and negotiating with the employees.

Originally published 21 July 2021

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.