Bonuses and maternity pay

In recent years, many of the legal uncertainties concerning maternity leave
have been clarified, either by case law or new legislation. However, one area
consistently causes problems for HR departments – whether or not discretionary
bonuses remain payable to women on maternity leave for part of or the whole
period.

What kind of bonus is it?

The relevant legislation says that all terms and conditions of employment
continue during ordinary maternity leave (currently the first 18 weeks of
maternity leave) with the exception of "remuneration", with Statutory
Maternity Pay (or in some cases maternity allowance) being payable instead.
When additional maternity leave is taken, the same rules apply in relation to
remuneration, although SMP will have been exhausted.

The issue is whether the particular bonus can properly be called
"remuneration". If it is, then legally it may be withheld and as long
as the employer has paid SMP, the individual has no further claim for pay. This
will be the case where the bonus is, in fact, a type of commission or salary
for work actually done.

Legally the more difficult scenario is where a bonus is paid on a
discretionary basis not necessarily related to specific work done. If, for
example, a bonus is paid to all employees to compensate them for their loyalty
during a particular period, it will almost certainly be unlawful to withhold
any of the bonus from any woman who has not been present at work solely due to
maternity leave.

However, if the bonus is paid purely on the basis of individual performance,
it could arguably be withheld on the basis that the employee is not in
"active" employment during the relevant period. Even here, however,
the legal position is unclear. It is often the case that bonuses paid by
employers are stated to be "discretionary". It is therefore quite
arguable that the employer is entitled to, and does, take into account other
factors other than pure individual output. If other factors become involved,
then the arguments become ever stronger: that the only reason an employer may
be withholding all or part of the bonus is because the woman was on maternity
leave. That, of course, would be direct sex discrimination.

Conclusions

It is therefore likely that the full bonus should be paid to a woman who has
been absent on maternity leave where the bonus is paid for loyalty or to
encourage loyalty in the future, where it is paid without regard to work
actually done by the woman herself, or where it reflects company performance,
rather than individual effort. Only where the bonus is directly tied to, and
preferably calculated solely by reference to the woman’s actual work output,
can it safely not be paid, or pro-rated to the period during which she actually
worked.

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