The term” bonus scheme” means something in addition to wages in the shape of money.
Bonus schemes can of course include the transfer of shares or options. That kind of performance indicates joint ownership of the business. This raises some special issues, which will not be dealt with in this article. Amongst Tekna’s members working in the private sector, we anticipate that about half of the members are covered by some form of bonus scheme.
It is essential to pinpoint Tekna’s advice regarding bonus scheme:
The base salary should be the prime income from your employer; The bonus scheme should only be a secondary income. You must be aware of that bonus schemes are not always awarded, and that you therefore should plan your financial life based upon the base salary only.
Bonus schemes in employment are regularly anchored in writing. Sometimes the bonus scheme is regulated in writing and in e.g. an employment contract. This institutes a possible bargaining for the agreement, and can insure that the agreement not unilaterally is modified, altered or terminated without your approval.
Tekna recommend that the bonus scheme always is in written, if possible. In the normal case though, the bonus scheme is regulated in the staff-handbook by the separate decision by the employer, or the bonus scheme is only described orally. In these cases, the agreement is normally subject to the employers’ decision –making authority.
A bonus scheme can involve all employees, a group of employees or only one employer. In a normal situation, the bonus scheme is awarded on a general basis, for instance for all employees or for a group of employees in a group. This is what we will define as a general bonus scheme, and are thus in contrast to an individual or performance-based bonus scheme.
Bonus program criteria
In accordance with the Hovedavtale between the two organisations NHO and Tekna § 10, the criteria for the bonus scheme is meant to be publicly known for those being part of a bonus scheme. This applies without reservations and regardless if the bonus scheme is based upon a general scheme or an individual one. It is of course of great matter, that the criteria are known for the participants in the bonus scheme. This ensures auditability and control of the bonus scheme remuneration.
The criteria in the bonus scheme are normally linked to a defined result, normally annual or as per six months. The bonus scheme remuneration can be made either as a percentage of a goal, or as a fixed sum. Furthermore, the criteria also can be related to the individual’s presence, or all employees’ production in a time interval.
Interpretation and completion of the bonus scheme
Some times, doubt arises regarding the content and the meaning of the bonus scheme. Is Paul entitled to the bonus scheme remuneration, and what is his exact share? Obviously, this is harder to answer, if no written contract or other regulations is available.
The basis rule for interpretation is normally the objective aim or causules stipulated in the contract, i.e. the text, protocols or other documents in written. This seldom solves the conflict, and is often the base for the dispute. It is therefore important to clarify what the two parties, or the employer meant with the words and phrases in the text. For example, previous practice from earlier years can provide some guidance. The same conditions relating to any dialogue between the parties regarding the bonus scheme can provide important arguments to the completion of the bonus scheme. Although there is not much legislation on this area, there are rules and verdicts that also can provide valuable information in settling a discussion over the bonus scheme text.
Bonus scheme and holiday payment
Often the question regarding the bonus scheme remuneration and holiday payment arises. As a clear rule, all remunerations gained from your employer are subject to be calculated in the basis for holiday payment. With remuneration the Holiday Act includes both the ordinary salary and wages and bonus scheme remunerations. The Holiday Act § 1 states that Holiday payment must be rewarded the year after the remuneration is earned.
Paul, who is paid his bonus scheme remuneration in 2010, is therefore entitled to receive his holiday payment for both his wages and his bonuses in 2011. If the employee has paid the bonus scheme remuneration along with the holiday payment the same year, Paul is still entitled to a new holiday payment the next year. This is stated in two High Court decisions. The exception form this ruling, is in cases where the employer deliberately has speculated in the possibility of gaining a double payment.
Bonus scheme and pension basis
In accordance with both the foretakspensjonslov and innskuddspensjonslov, wages during the year is assumed in the pension base. With the expression” wages”, is meant the taxable personal income gained form the employer.
Bonus scheme remunerations paid during the year, should therefore be included as a general rule. However, legislation states that the pension schemes own regulations can except variable or temporarily income or wages. The pension scheme regulations also apply for an exempt for a maximum of 10 % proportion of the salary. The definition of what is temporarily will depend on the specific situation, but should be defined in the pension scheme regulation.
If Paul receives his bonus scheme remuneration in 2008, but neither has received a bonus remuneration in 2007 or 2009 – 2010, the bonus is most likely to be defined as temporarily. Tekna’s advice is to reassure you of the regulations pending. If you fell uncertain, please be advised to address your questions to the pension schemes steering committee in your company, if such committee is available. If not, please be advised to contact the Employers representative directly. Tekna believe that the bonus scheme remunerations as a main rule should be defined and included in the pension basis.
Bonus scheme and termination of the employment
A common point of view made by the employer, is that the bonus scheme numeration will not be awarded, if you have left a dismissal note before the bonus payment is done. The same point of view is made if you already have quitted your job before the payment is awarded.
Many find this statement to be unlawful and unfair. What is right? Basically the answer of the question depends of the interpretation and completion of the bonus agreement, if this can be reviewed. If the matter is not regulated, it is a natural to claim the same treatment and payment as your colleagues.
Those who join the company during the year when the bonus scheme is running should in general be entitled to a proportionate share of the bonus scheme stated. If Paul has worked for 8 months during the year where the bonus scheme was effective, his share should be awarded with 8/12 of the overall bonus scheme remuneration. The question regarding Pauls share should thus be subject to a closer review. We encourage you to please contact Tekna’s legal department for assistance and legal advice on any disputes in connection with you leaving your employer.
Bonus scheme and leave
If you are on leave, e.g. a maternity leave in accordance with the Labour Act regulations, the question is whether you are entitled to all or a proportionate share of a bonus remuneration. The assumption is that the company has introduced a general bonus scheme at the corporate or group level. The question must be assessed in relation to the bonus scheme, the wordings and the companies rulings and practice.
Likestillings- og diskrimineringsombudet (The Ombudsman responsible for surveillance of equality and discrimination in Norway) has in previous rulings stated that employees in such leave should not be discriminated in terms of reduced or absence of remunerations. The rulings indicates that it is natural that bonus is paid for the period actually worked before leave as a pro ratio payment.
Questions regarding options leading to co-ownership in your company, can be addressed to Tekna’s legal department.