Performance-related pay explained
Performance-related pay is a way of rewarding employees for higher performance. There are a number of reasons why your employer might introduce this type of pay scheme. They may:
- be keen to keep current staff
- want to compete for new talent
- be seeking a fairer way of distributing wages
In order for performance-related schemes to work they should be based on clear, measurable targets that are agreed by both employer and employee. You will normally find out about these targets from your contract of employment and performance appraisal meetings you have with your manager.
Short-term schemes usually offer bonus payments or commission on sales achieved. Payments vary and these schemes are normally used to encourage staff to improve their own performance.
Long-term schemes offer rewards, like share options, and can help to encourage loyalty to the organisation and its aims.
What to do if you have problems
If you don't receive bonus or commission payments which you believe you're owed, check your contract of employment, written statement of key employment terms, or staff handbook to see how your bonus is paid. Ask your employer if you need more information.
Sometimes it is agreed that bonuses will be paid out at your employer's discretion. In other words, it is up to your employer to decide who will receive them and how much. When this happens, your employer must exercise that discretion in a justifiable manner. If you think a mistake has been made you should:
- speak to your employer to see if there has been a misunderstanding
- ask your employer to set out in writing how they have calculated your pay
- keep copies of any letters and notes of any meetings
- How to resolve a problem at work
There are three ways that the law might cover a case of unpaid bonuses:
- breach of contract
- unlawful deductions from wages
- unlawful discrimination
Deductions from wages/ breach of contract
Any right to a bonus will normally be included in your contract of employment. It may not always be written down as it can be verbally agreed or understood to be there due to normal business customs.
If a bonus or commission is included in your contract, non-payment is a breach of contract unless there's another term in your contract stating differently. Failure to pay a bonus or commission that you are entitled to could also amount to an unlawful deduction of wages.
You are entitled to claim both breach of contract and unlawful deduction from wages, but you won't get back more money than you've lost. Deductions from wages claims are often easier to make.
Your employer must not discriminate against particular groups of people, like giving smaller bonuses to women, for example. Ideally your employer should have some guidelines that set out the normal range of bonus to give.
What happens if you quit your job
You should check your contract of employment very carefully to see when your employer is allowed to withhold your pay. Normally you are entitled to be paid everything you earned up to the point you finished. If you are forced to resign as a result of your employer refusing to pay you, you might be able to make a constructive dismissal claim.
Unless you can prove you were constructively dismissed, you will not get paid for any notice that you don't work. Your future commission payments will depend on the terms of your contract.
Where you can get help
The Labour Relations Agency (LRA) offers free, confidential and impartial advice on all employment rights issues for residents of Northern Ireland.
Advice NI offers free and impartial advice.
If you are a member of a trade union, you will also be able to get advice and support from them.