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Bonus schemes – the discrimination risk

Bonus schemes (particularly if they contain a rigid set of rules which are difficult to depart from) can sometimes lead to difficulties. This is illustrated by the recent case of Land Registry v Houghton and others, where the Employment Appeal Tribunal found that an employer operated its discretionary bonus scheme in a discriminatory way.

Picture of a hand holding money

Under the Land Registry’s bonus scheme, employees who received a formal warning during the bonus year lost their eligibility to receive a bonus. Managers had an ability to ignore formal warnings if they were given for conduct-related matters, but there was no discretion to ignore warnings given for sickness absence.

The case involved five disabled employees, who had all suffered sickness absence as a result of their disabilities during the bonus year. Although the Land Registry had extended its normal absence triggers in their favour, the employees had still exceeded the adjusted triggers and received a formal warning. This meant that they lost out on their bonus.

The employees raised employment tribunal proceedings against the Land Registry. The tribunal upheld their claim for discrimination arising from a disability, holding that loss of the bonus was the consequence, result, effect or outcome of each employee’s disability.

The Land Registry attempted to present a justification defence to the employees’ claims. The tribunal accepted that it had a legitimate aim of acknowledging employees’ contributions and specifically encouraging and rewarding good performance and attendance. The tribunal did not accept, however, that the bonus scheme was a proportionate means of achieving that aim. Specifically, the scheme was unable to take into account that three of the employees had improved absence records after the warning, and it was anomalous that conduct related warnings – but not sickness absence related warnings – could be ignored. These findings were upheld by the Employment Appeal Tribunal.

As this case shows, it is worth bearing in mind that it is often helpful to incorporate a degree of flexibility into bonus schemes. Although this can lead to a slight loss of certainty, it can help to avoid difficult situations like the one in this case.

Liam Lane

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