How to implement and manage a discretionary bonus scheme

Author: Claire Birkinshaw

Summary

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• Draw up a set of bonus scheme rules specifying the bonus scheme to be non-contractual.
• Carefully consider the requirements for eligibility for a bonus.
• Set out in detail the key performance conditions that must be met in order for a bonus to be paid.
• Subject to legal requirements, consider whether bonuses are to be paid to employees on maternity and long-term sick leave.
• Once it has been implemented, actively manage the bonus scheme.
• Ensure that discretion as to payment of a bonus is exercised fairly and reasonably and not arbitrarily.