Don’t hogtie yourself to bonus payments

Take care. Steer clear of contract clauses that commit you to nonrevocable bonuses. A New England manufacturing employer learned this lesson the hard way. The company had paid Christmas bonuses for as long as most veteran employees could remember.
By Raymond Dreyfack February 1, 2000

Take care. Steer clear of contract clauses that commit you to nonrevocable bonuses. A New England manufacturing employer learned this lesson the hard way.

The company had paid Christmas bonuses for as long as most veteran employees could remember. But during the past 2 yr, sales had declined, causing a “Management regrets” message to be posted on the bulletin board announcing that bonuses would be omitted this year.

A storm of protest ensued. Among beefs heard: “I look forward to that bonus and consider it a regular part of my salary.” “If not for the bonus, I would have been out of here long ago.” “I already had the money spent.”

A committee of three persuaded Maintenance Manager Arthur Metcalf to intercede on their behalf.

“The crew’s up in arms,” Metcalf told his boss, Plant Engineer Vincent Abruzzio. “Morale has never been lower. They act like we’re taking the bread out of their mouths.”

Abruzzio frowned. “Precedence has been set, so they may have a point. I’ll give the matter some thought and get back to you.”

Question: What do you think? Is a bonus a gift, or a forever commitment?

Plant engineer’s prescription: Abruzzio tried to persuade the company’s general manager to reinstate the Christmas bonus.

“For one thing,” he said, “our wage scale is lower than many of our competitors. For another, in the past, the anticipated bonus has caused some employees to stay who might have otherwise quit. In addition, while the labor agreement doesn’t specifically commit to the annual bonus, its longtime disbursement fuels worker expectations to receive it. Finally, the morale damage caused by discontinuing it could more than outweigh the benefit gained from its omission.”

The outcome was that the bonus for this year was reinstated. However, it was also made clear to management and the employees that a new contract clause would specify that in the future, business conditions would be a factor in determining whether or not bonus payments were affordable.

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