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Old 08.10.2020, 00:32
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Bonus payout when resigning

Hello Forumites,

Can you please help me with an employment law query with respect to bonus payout when resigning. A bit of background information below:
  • I intend to resign at the end of Nov;
  • I have a 3 month notice period;
  • My employer's financial year (and bonus period) is Jan to Dec; and
  • Bonus is typically paid out in March / April.

My contract and the employment regulations are both silent on what happens when you resign. Both have the following clauses:

"You will be eligible to participate in the Annual Bonus plan of the Company as amended from time to time at the sole discretion of the Company.

You are aware and accept that the Annual Bonus plan at the sole discretion of the Company at any time.

Any payment or grant constitutes a special payment as provided for in article 322d of the Swiss Code of Obligations. The employee does not have a right to receive any such payment or grant and any payments or grant made, cannot be taken as a precedent for future or further payments or grants.
Any payment or grant is a one-time, voluntary payment or grant, which is neither usual nor compulsory or automatic. From such payment or grant arises no claim to a share in the profit or turnover in the sense of Article 322a Swiss Code of Obligations."

There is an Annual Bonus plan document but this is also silent on resigning. However, I recently came across a policy/directive document (with respect to performance review as well as salary and bonus reviews) which states that if the employee resigns before the payout of the bonus then the employee forfeits the bonus entitlement.

This policy/directive is not specifically mentioned in my contract or in the employment regulations or in the annual bonus plan document. However, the employment regulations does have a catch all clause "all of the Company's internal policies and guidelines form integral parts of every employment contract in their respective valid versions".

I have gone through the Swiss Code of Obligations (Art. 322d C. Obligations of the employer / I. Salary / 4. Bonuses) which states

"1 Where the employer pays a bonus over and above the salary on particular occasions, such as at Christmas or the end of the financial year, the employee is entitled to such bonus where it is contractually stipulated.

2 If the employment relationship ends prior to the occasion on which the bonus is paid, the employee is entitled to a pro rata bonus where the contract so provides."

My understanding of the Code is that I am entitled to a pro-rata bonus and given that I will be resigning in November this constitutes a pay-out for the full year. Is my understanding correct?

Where do I stand with respect to the employment law and contract/employment regulation? Am I entitled to a payout? I would really appreciate it if someone could provide some feedback particularly if they have had a similar experience.

Sorry this is a rather lengthy post and thanks in advance,

Lost
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  #2  
Old 08.10.2020, 10:51
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Re: Bonus payout when resigning

Where my wife works you are ineligible for a bonus if you resign (including retire) anytime during the year (including 31 December). If you are not on the payroll on 1 January no bonus for you. Almost everyone leaves 30 January. It is clearly spelled out in their contracts.
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Old 08.10.2020, 10:59
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Re: Bonus payout when resigning

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Where my wife works you are ineligible for a bonus if you resign (including retire) anytime during the year (including 31 December). If you are not on the payroll on 1 January no bonus for you. Almost everyone leaves 30 January. It is clearly spelled out in their contracts.
Thanks for the reply.

I am intending to resign on 30 November, so I will be employed all the way to end of Feb.

My concern is the policy document that states "if the employee resigns before the payout of the bonus then the employee forfeits the bonus entitlement."

This to me seems to imply that if I resign any time before the March payroll, I lose my entitlement which effectively means that if I want to be paid entitlement then I basically have to work for 18 months (resign end of March + 3 months)!! This seems a bit unfair particularly as this wasn't part of the contract I signed up to. I signed up to the Swiss Code of Obligations which seems to imply that I am entitled to a payout.
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Old 08.10.2020, 11:01
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Re: Bonus payout when resigning

The bonus is discretionary. Don't expect anything to be paid out.


If you want to be sure about your bonus, resign the day after it has been transferred to your bank account.
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Old 08.10.2020, 11:06
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Re: Bonus payout when resigning

From your opening post

"You are aware and accept that the Annual Bonus plan at the sole discretion of the Company at any time.

Any payment or grant constitutes a special payment as provided for in article 322d of the Swiss Code of Obligations. The employee does not have a right to receive any such payment or grant and any payments or grant made, cannot be taken as a precedent for future or further payments or grants.
Any payment or grant is a one-time, voluntary payment or grant, which is neither usual nor compulsory or automatic. From such payment or grant arises no claim to a share in the profit or turnover in the sense of Article 322a Swiss Code of Obligations.
"

You're assuming there'll even be one this financial year. Will there? With the coronavirus situation can you be sure the company will pay one?
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Old 08.10.2020, 11:08
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Re: Bonus payout when resigning

It may depend on the language but resignation notices in English tend to say “I intend to resign on 28 February 2021”. QED the resignation isn’t the date of notification.
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Old 08.10.2020, 11:11
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Re: Bonus payout when resigning

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Hello Forumites,

Can you please help me with an employment law query with respect to bonus payout when resigning. A bit of background information below:
  • I intend to resign at the end of Nov;
  • I have a 3 month notice period;
  • My employer's financial year (and bonus period) is Jan to Dec; and
  • Bonus is typically paid out in March / April.

My contract and the employment regulations are both silent on what happens when you resign. Both have the following clauses:

"You will be eligible to participate in the Annual Bonus plan of the Company as amended from time to time at the sole discretion of the Company.

You are aware and accept that the Annual Bonus plan at the sole discretion of the Company at any time.

Any payment or grant constitutes a special payment as provided for in article 322d of the Swiss Code of Obligations. The employee does not have a right to receive any such payment or grant and any payments or grant made, cannot be taken as a precedent for future or further payments or grants.
Any payment or grant is a one-time, voluntary payment or grant, which is neither usual nor compulsory or automatic. From such payment or grant arises no claim to a share in the profit or turnover in the sense of Article 322a Swiss Code of Obligations."

There is an Annual Bonus plan document but this is also silent on resigning. However, I recently came across a policy/directive document (with respect to performance review as well as salary and bonus reviews) which states that if the employee resigns before the payout of the bonus then the employee forfeits the bonus entitlement.

This policy/directive is not specifically mentioned in my contract or in the employment regulations or in the annual bonus plan document. However, the employment regulations does have a catch all clause "all of the Company's internal policies and guidelines form integral parts of every employment contract in their respective valid versions".

I have gone through the Swiss Code of Obligations (Art. 322d C. Obligations of the employer / I. Salary / 4. Bonuses) which states

"1 Where the employer pays a bonus over and above the salary on particular occasions, such as at Christmas or the end of the financial year, the employee is entitled to such bonus where it is contractually stipulated.

2 If the employment relationship ends prior to the occasion on which the bonus is paid, the employee is entitled to a pro rata bonus where the contract so provides."

My understanding of the Code is that I am entitled to a pro-rata bonus and given that I will be resigning in November this constitutes a pay-out for the full year. Is my understanding correct?

Where do I stand with respect to the employment law and contract/employment regulation? Am I entitled to a payout? I would really appreciate it if someone could provide some feedback particularly if they have had a similar experience.


Lost
A bonus is a discretionary reward for being in employment with the company, it is not a right that you are entitled to when resigning (unless of course your contract somehow specifically states otherwise). If the policy says you forfeit the bonus when resigning before it's paid out then, that's what happens unless the company for some inexplicable reason sees fit to agree otherwise.
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Old 08.10.2020, 11:11
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Re: Bonus payout when resigning

Many years ago, a colleague resigned a month before the bonus cut-off. As he was a well-liked member of the team we made sure the leaving gift whipround was generous.
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Old 08.10.2020, 11:22
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Re: Bonus payout when resigning

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Hello Forumites,

2 If the employment relationship ends prior to the occasion on which the bonus is paid, the employee is entitled to a pro rata bonus where the contract so provides."
[/I]
Lost
corrected the highlighting for you.

the answer is likely no, you will not get the bonus if you resign before the payout.
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Old 08.10.2020, 11:36
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Re: Bonus payout when resigning

You should know that there exists an option in Switzerland where you can 'announce' your resignation with a future date. That could be something to explore. That way you only resign post the bonus payment date. However as it is discretionary, they may still choose to not pay you or reduce the amount. The sure fire way is resigning after the bonus is credited into your account. Worth checking with a Lawyer or a Union Rep if you want to be 100% sure.
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Old 08.10.2020, 11:44
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Re: Bonus payout when resigning

I get the whole "discretionary" nature of the bonus but the fact that I have stringent targets which I have busted my balls for (particularly with everything going on) and would have delivered for the full year for which the bonus relates to, it just seems a bit unfair that the Company can refuse to payout because it has complete and sole power to set an arbitrary payout date that I was not aware of and did not consent to when I joined.

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You're assuming there'll even be one this financial year. Will there? With the coronavirus situation can you be sure the company will pay one?
Yes, unless the last two months go to craps really bad then yes, there should be one.

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Many years ago, a colleague resigned a month before the bonus cut-off. As he was a well-liked member of the team we made sure the leaving gift whipround was generous.
haha, I very much doubt that the most generous whipround will even cover 5% of the entitlement

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corrected the highlighting for you.

the answer is likely no, you will not get the bonus if you resign before the payout.
Are you saying that the fact that I am eligible to participate in the scheme and I have a target payout does not mean that the "the contract so provides" i.e. means diddly squat!

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It may depend on the language but resignation notices in English tend to say “I intend to resign on 28 February 2021”. QED the resignation isn’t the date of notification.
OK, what I am reading here is that if I postpone giving in my notice to end of December and state that I intend to resign on 31 March, I should be eligible for a payout (assuming the payout is in the March payroll)?

Anyone else have experience of what Bowlie is suggesting?
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Old 08.10.2020, 12:07
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Re: Bonus payout when resigning

Our discretionary bonuses are announced mid February and paid out end of March.

Allegedly you need to have not handed your notice in at the time of announcement to be paid. I know of no one in the 11 years I‘ve worked in the Swiss entity (rules in London are clear - resign before payout = forfeit bonus) who has taken the risk of resigning between their bonus being announced and it being in their bank account.

If it‘s worth so much, I would just wait. If you are so valuable to your new company they will either wait for you or offer to buy out your bonus.
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Old 08.10.2020, 12:14
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Re: Bonus payout when resigning

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I get the whole "discretionary" nature of the bonus but the fact that I have stringent targets which I have busted my balls for (particularly with everything going on) and would have delivered for the full year for which the bonus relates to, it just seems a bit unfair that the Company can refuse to payout because it has complete and sole power to set an arbitrary payout date that I was not aware of and did not consent to when I joined.
You of course you consented to abide by all of the relevant company policies the moment you signed the contracts. What you perceive as 'fair' has nothing to do with it, those are the rules. Sounds like they have the same bonus restrictions as I've heard other companies have, too.
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Old 08.10.2020, 12:23
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Re: Bonus payout when resigning

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OK, what I am reading here is that if I postpone giving in my notice to end of December and state that I intend to resign on 31 March, I should be eligible for a payout (assuming the payout is in the March payroll)?

Anyone else have experience of what Bowlie is suggesting?
From my experience, if you resign in any form before the company have initiated the actual payment you will get nothing. They have no incentive to pay someone who is leaving from a limited bonus pool that could be reallocated to people who are staying.

The contract gives them plenty of space to do this, so unless you are truly exceptional and they think they need to keep in your good books you will get nothing.

I've seen a bonus payout to a leaver once in my entire 30+ year career.
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Old 08.10.2020, 12:24
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Re: Bonus payout when resigning

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If it‘s worth so much, I would just wait. If you are so valuable to your new company they will either wait for you or offer to buy out your bonus.
It is worth a fair bit particularly as I am taking a relatively hefty pay cut for the next role - it is once in a lifetime opportunity and these don't come around that often albeit with very sh!tty pay - so that should also give you an indication that there is no way I would be made whole by my new employers.

Also, delaying the start date beyond 1 April is not an option as they have already agreed to a delay of up to 3 months from their preferred start date of 1 Jan.

Lets see, if it boils down to the new position or sticking around for the bonus, the decision is straightforward: new position as this is something I really want and I have already committed to it BUT the bonus will be very handy.
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Old 08.10.2020, 12:33
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Re: Bonus payout when resigning

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You of course you consented to abide by all of the relevant company policies the moment you signed the contracts. What you perceive as 'fair' has nothing to do with it, those are the rules. Sounds like they have the same bonus restrictions as I've heard other companies have, too.
Except this just feels a bit extreme. They could unilaterally change the payout to 5 years after and there is nothing you could do.

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From my experience, if you resign in any form before the company have initiated the actual payment you will get nothing. They have no incentive to pay someone who is leaving from a limited bonus pool that could be reallocated to people who are staying.

The contract gives them plenty of space to do this, so unless you are truly exceptional and they think they need to keep in your good books you will get nothing.

I've seen a bonus payout to a leaver once in my entire 30+ year career.
My old place had a similar payout structure / timelines and they paid me after I had resigned (and actually left). Admittedly, there was no clause/policy document that stated that I forfeited my entitlement if I resigned before payout.

Can someone clarify, from a legal / Swiss Code of Obligations perspective, what constitutes resignation - is the date I hand in my notice or the last day of employment?
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Old 08.10.2020, 12:39
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Re: Bonus payout when resigning

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Except this just feels a bit extreme. They could unilaterally change the payout to 5 years after and there is nothing you could do.
This actually happens a lot with deferred compensation. If you leave before the vesting period, you lose the unvested compensation.
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Old 08.10.2020, 12:39
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Re: Bonus payout when resigning

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Except this just feels a bit extreme. They could unilaterally change the payout to 5 years after and there is nothing you could do.
It's not extreme, it's standard practise, and you are ironically just making up a really extreme example to suit your logic. I get that you are annoyed about losing your bonus due to a clause that you did not inform yourself about, but you're just going to have to deal with it.
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Old 08.10.2020, 12:42
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Re: Bonus payout when resigning

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OK, what I am reading here is that if I postpone giving in my notice to end of December and state that I intend to resign on 31 March, I should be eligible for a payout (assuming the payout is in the March payroll)?
The reality is that you have no legal right to a bonus and once they know you are leaving it is very unlikely you will receive a payout.

In thirty years I never heard of anyone getting a bonus once they had handed in their notice. And in fact the big flood of resignations used to come after the bonus was paid out.

So if you want to be sure of the bonus then you can only hand in your notice after the 31st of March next.
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Old 08.10.2020, 12:50
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Re: Bonus payout when resigning

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This actually happens a lot with deferred compensation. If you leave before the vesting period, you lose the unvested compensation.
I actually disagree with you on this. The bonus is variable compensation and not deferred compensation.

I actually have RSUs and PSUs which are unvested and I have happily forfeited.

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It's not extreme, it's standard practise, and you are ironically just making up a really extreme example to suit your logic. I get that you are annoyed about losing your bonus due to a clause that you did not inform yourself about, but you're just going to have to deal with it.
How could I have informed myself if this isn't part of my employment contract or the employment regulation, not even a reference to such a policy/directive?
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