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Is your Bonus Scheme Equality Act Compliant?

It is the perennial issue for employers; how do you design a bonus scheme in order to motivate and reward staff without falling foul of any of the equality provisions?

The tension between the employer’s desire to reward what it sees as good behaviours and the rights of protected employees was thrown into sharp relief in the recent case of Land Registry v Houghton and Others.  Each of the claimants in that case suffered from a disability, and in each case that disability had resulted in a number of sickness absences. The Land Registry managed sickness absence by using a number of trigger points and issuing appropriate warnings.  It was generally accepted that the Land Registry had made reasonable adjustments in respect of those employees by adjusting the point at which warnings were triggered and offering assistance to the individuals to help them overcome their disabilities. Notwithstanding those adjustments, each of the claimants received a warning in respect of their absence levels.

The Land Registry operated a bonus scheme, but under the rules of that scheme, anyone with a warning for absence was not eligible for an award. In contrast, managers had a discretion to give the award to anyone with a conduct warning

The claimants were not awarded a bonus and brought a claim alleging less favourable treatment.

The Employment Tribunal and Employment Appeal Tribunal found that in each case the absences leading to the warning were disability related. That type of warning automatically disentitled the claimants to the bonus. That of itself was sufficient to amount to unfavourable treatment (non-payment of the bonus) in consequence of the disability.

The tribunals then went on to look at the employer’s defence of justification.  Clearly this needed to be a balancing act between the rights of the employees and the purpose of the scheme to encourage good attendance. The lack of discretion in being able to give a bonus when the employee had an attendance warning was clearly a factor in the tribunal coming down on the side of the employee, but the tribunal also felt that the lack of bonus was too harsh given that all of the employees’ attendance levels were improving.

The case is certainly not saying that attendance cannot be a factor in bonus schemes. However, employers should proceed with caution, particularly as it is not always easy to identify which absences arise from a disability. Many may conclude that such a scheme is simply more trouble than it is worth.

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Alex Clements


Alex has advised on the whole range of contentious and non-contentious matter including defending…

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