Buddy says:  Generally, if the bonus is discretionary and not paid through the payroll, it will not constitute wages or salary and should be paid to employees on Ordinary Maternity Leave (OML).  Those on Additional Maternity Leave (AML), in most cases, will have no entitlement to any bonus. Note that during the first two weeks of maternity leave, which constitutes Compulsory Maternity Leave (CML), all bonuses should be paid without exception.  However, as can be seen below, this is a tricky area of law which has been overtaken by developments in discrimination and equal pay.  Accordingly, caution is necessary before making any decision not to pay a Christmas bonus to those on maternity leave.

Employer information:  Christmas bonuses are traditionally given to employees to say “thank you” for the work carried out during the past year. Express provision for Christmas bonuses are seldom included in the contract of employment.  Consequently, many employers think that there is no contractual obligation to pay the bonus. This however is not necessarily the case if a bonus has been paid without exception for a number of years. In such cases employees may be able to assert that, owing to custom and practice, the bonus has become a contractual term.  Whether a bonus is truly discretionary or not will have an affect on whether it will be payable during maternity leave.  Where a bonus is essentially a loyalty payment (i.e. the only criteria being that the employee has to be employed to receive it), and it is not based on performance, then this should be paid to everyone, including women on maternity leave.

During a woman’s 26 weeks OML, all employment rights continue save for their right to remuneration, which is defined as “sums payable by way of wages or salary” under the Maternity and Parental Leave Regulations 1999.  Unfortunately there is no guidance as to whether a bonus falls within this definition.  However, it seems that where a bonus is purely discretionary (for example, paid on an ad hoc basis without reference to performance or length of service and not paid through the payroll), then it will not constitute remuneration and so is likely to be payable.  During AML only a limited number of terms and conditions continue, which do not include remuneration (there is no definition of remuneration for AML purposes so, arguably, it could be wider than “wages or salary”).  This means that generally, any right to a bonus (discretionary or otherwise) is suspended for the duration of AML.

However, each arrangement needs to be assessed in the context of the overall bonus arrangements, in order to determine if it will be classed as remuneration and to establish if it is discretionary or contractual. 

The issue of bonuses is a very grey area which has resulted in conflicting decisions by courts and tribunals. As the area of bonuses is not definitive, with case law on discrimination and equal pay also being relevant, our advice is to tread carefully and if in doubt seek legal advice. 

For further information please see our Buddy guidance note on “Pay and Benefits” and our fact sheet on “Bonuses”