Introduction
Judicial decisions
Comment
The Labour Code contains no regulations concerning bonuses. As a bonus is an optional component of an employee's remuneration, it is up to the employer to decide whether to introduce a bonus for its employees. Where relevant, the conditions for receiving a bonus are detailed in the employer's bonus rules.
In the absence of Labour Code regulation, the rules for receiving bonuses are largely determined by decisions of the Supreme Court. In principle, these decisions indicate that a bonus is a benefit, the payment of which is dependent on the fulfilment of material and verifiable conditions, as opposed to a gift, which does not depend on such conditions and is granted at the employer's discretion.
The bonus rules determined by the Supreme Court reveal significant differences when compared to common law practice. In particular, these concern:
- the right to withhold a bonus from an employee if, despite the bonus-related tasks having been carried out during the settlement period, he or she is not employed on the day of payment of the bonus; and
- the obligation to pay a proportion of the bonus where the bonus-related task is carried out after the deadline or only to a certain extent.
Settlement period
With regard to the first issue, the Supreme Court has made clear that this provision is inappropriate. This follows from the basic assumption that the decision on whether a bonus is granted can be subject only to the circumstances that existed during the settlement period - in particular, whether the employee carried out the bonus-related tasks during this period. For example, the court's rulings indicate that it would be ineffective to deprive an employee of a bonus for 2011, to be paid out under the bonus rules on March 31 2012, if the employee had carried out the bonus-related tasks set out in the rules in 2011, but his or her employment relationship had been terminated in the period from January 1 2012 to March 31 2012. In extreme cases, exceptions are possible.
Proportional bonuses
Although there are few judicial decisions on the second issue, an important change took place in this respect in 2010.
Pre-2010 position
The Supreme Court had previously held that although partial performance of a bonus task or performance after the set deadline justifies a reduction in an employee's bonus, he or she should not be deprived of the bonus if the performance retains the same (or a proportionally reduced) value to the employer. The court accepted that in the case of performance of a bonus-related task after the deadline (eg, a task consisting of introducing a specific product into production on a specific day), the employee would be entitled to a proportional bonus if the task carried out after the deadline retains the same (or a proportionally lower) value to the employer. Proof that performance of a task after the deadline - for example, putting a product into production - has the same (or a proportionally lower) value for the employer could, in the court's opinion, be demonstrated by the fact that despite the delay, the employer did not withdraw the product from sale. However, performance of a bonus-related task after the deadline would not result in an obligation to pay the bonus if the achieved result is irrelevant - for example, where the employee did not succeed in putting a product on sale before a given event and the product has a close link to that event (eg, Christmas decorations).
With regard to the incomplete performance of a bonus-related task, the court accepted that if an employee had carried out the bonus-related task to an incomplete extent (eg, if he or she achieved 50% of a sales plan), the employer was not entitled to deprive him or her of the bonus, but could reduce it proportionally (eg, by 50%).
Post-2010 position
In 2010 the court reconsidered its position on the incomplete performance of a bonus-related task. According to recent decisions, an employer may make the right to a bonus dependent on full performance of the task. Therefore, even a small degree of non-performance will allow the employer to withhold the bonus. This rules out the assumption that incomplete performance of a task, or even minor non-performance, entitles the employer to grant only a partial bonus, in proportion to the performance of the task. This view still holds if the bonus was not formulated as a benefit dependent on the work as a whole, but on performance of a specific task (eg, achieving a specified level of production). The court has now stated that granting proportional bonuses is inadmissible as, in its view, this would represent a change in the bonus rules by introducing a benefit (in proportion to the degree of performance of the task) not specified in the rules, in which the bonus is made conditional only on performance of the task to a specified minimum degree.
In light of recent binding judicial decisions, performance of a bonus-related task in the settlement period does not entitle the employer to withhold an employee's bonus simply because the employee was not employed on the day of payment of the bonus, if this is after the settlement period. Performance after the set deadline does not entitle the employer to withhold an employee's bonus if the task performed after the deadline retains the same or a proportionally lower value for the employer. Incomplete performance entitles the employer to withhold an employee's bonus in full if the rules for granting bonuses make payment of the bonus dependent on performance of the task at a specified minimum degree.
For further information on this topic please contact Sławomir Paruch or Łukasz Chrusciel at Soltysiński Kawecki & Szlęzak by telephone (+48 22 608 7000), fax (+48 22 608 7070) or email ([email protected] or [email protected]).