With the festive season just around the corner, South African workers have been warned that receiving a year-end bonus is not a guarantee.\u00a0<\/p>\n\n\n\n
Ayesha Karjieker, Associate in Employment Law at Cliffe Dekker Hofmeyr, noted that times are incredibly tough, with the cost of living crisis seemingly never-ending. <\/p>\n\n\n\n
Many South Africans are thus expecting a year-end financial bonus to help fund what feels like a very long and financially draining festive season. <\/p>\n\n\n\n
However, Karjieker warned that employees shouldn\u2019t assume they will receive a bonus. <\/p>\n\n\n\n
Under South African law, employers are not required to pay a year-end bonus. Any obligation to do so arises from the terms of the employment relationship. <\/p>\n\n\n\n
If the employment contract expressly provides for a bonus, such as a guaranteed “13th cheque,\u201d the employer has to honour the provision. <\/p>\n\n\n\n
A similar obligation can also arise from a company policy, staff handbook, or collective agreement that outlines the right to a bonus or discretion subject to stated criteria.<\/p>\n\n\n\n
Moreover, a consistent and long-standing practice of paying a bonus on the same terms each year can result in a reasonable expectation regarding the payment of a bonus. <\/p>\n\n\n\n
Whether such an obligation exists depends on the facts, especially the consistency, clarity, and intention behind the practice.<\/p>\n\n\n\n
When the bonus is described as discretionary, the employer\u2019s discretion must still be exercised lawfully and fairly.<\/p>\n\n\n\n
Bonuses are generally regulated via employment contracts, company policies or handbooks, and collective agreements within the framework of the Basic Conditions of Employment Act and the Labour Relations Act.<\/p>\n\n\n\n
A bonus can also be a guaranteed entitlement or a discretionary benefit, often linked to performance. <\/p>\n\n\n\n
The wording of the relevant contract or policy is crucial in determining whether an employee is entitled to a bonus. <\/p>\n\n\n\n
If the employer retains discretion, it must exercise that discretion rationally, consistently, and in good faith, in accordance with any stated performance criteria or scheme rules.<\/p>\n\n\n\n
Employers may not ignore or unfairly change published criteria once employees have relied on them.<\/p>\n\n\n\n
Bonus decisions must also comply with the Employment Equity Act. Withholding or reducing a bonus for a prohibited ground, such as race, gender, or pregnancy, would amount to unlawful discrimination.<\/p>\n\n\n\n
When it comes to tax, bonuses, including 13th cheques, are considered part of an employee\u2019s remuneration and are subject to PAYE in the month they are paid.<\/p>\n\n\n\n
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