Redundant Employee requesting Incentive Payment

[DanB]

Hi Everyone,


If an organization has made an employee redudnant (through no fault of their own), should that ex employee still be entitled to receive the incentive payment for achieiving and above their targets in the 2011/2012 financial year?

The business went through a restructure in late June/July with the financial year figures of the Sales team not completely finalised. Now that they have been completed, it has been noted that this ex employee reached all their KPI's and went above in some categories. Additionally the employee is asking when they will receive this payment - therefore clearly they are aware of their performance.

Are we legally obliged to pay this incentive payment? I would say yes we are as the employee earned this amount - but any other advice would be appreciated.

Regards

[Qld IR Consultant]

Dan, first off there is nothing stopping the employee from making a claim for the monies.

I think it would be in the companies best interest to pay the amount because, as you have stated, they clearly met the required level of performance to earn the bonus. Had they still been working for the company they would have been paid the bonus anyway.

I would think out of good faith and good practice it should be paid......

[Tasman McManis]

Hi Dan

Usually, organisations have rules around incentives and their payment which will help them decide to pay the incentive or not. If you don't have detailed rules around the incentive/sales plan I recommend that you introduce them ASAP for this year.

Having said that, I believe (especially where someone is made redundant) that if an employee has been with the organisation the whole year, made their numbers and added to the success of the organisation they should be paid their bonus/incentive. If the organisation doesn't have plan rules in this area then I would think that if there is a legal stoush the organisation would more than likely lose out.

Regards Tasman

[Tiger]

I tend to agree with other contributors. If the commission/incentive was fully earned and it just hadn't been paid out yet (at time he left the business), on the face of it, he should receive it. Even if the period was not quite completed when he left, I still think a pro rata proportion of what was due should be paid.

Some years ago I had a bonus written into my contract (I was a fixed termer so had left the business way before the numbers were ever finalised). I contacted the company six months later to ask when payments were to be made and told on the spot what I would be receiving.

Recently, where I am at present, we had guy who had to get out (new company now owns old, very different culture, we will lose a few who won't make it in the new). He would have resigned but didn't want to lose what was in effect the 4th instalment of a deal done in late 2009. In this case, the company's Compensation Plan (which varies from year to year) from that year stated if the employee voluntarily left before end of the anniversary (Dec'12), he would waive the right to that commission (about $55K worth!). I went to bat on his behalf (put a case based on medical and other grounds for letting him go WITH his full commission). It had to be approved by the CEO in the USA and it was, guy got to resign and got his commission. I cite this example because whatever is written can often be overruled by senior management decisions based on a case by case facts.

I'm also a strong believe in the ethics of this kind of thing. Morally, I think you owe it to this guy to pay him his due. The upside for your business is you will have made an unhappy camper (being retrenched) happy (paying him his incentive) and that is what he'll take away with him - less likelihood therefore of him bad mouthing your company!

[Tasman McManis]

Nice Work Tiger!

My only additional comment which I think is consistent with Tiger's comment is that in your plan rules (not part of the contract of employment as discussed recently elswhere in HRBuzz) you should include a paragraph that clearly allows for management discretion. It ensures there is flexibility in the plan and also provides a right of appeal process if the final discretion is set at an appropriate higher level above the manager who has day to day carriage of the plan.

Regards Tasman

[DanB]

HI All

Thanks for your feedback/thoughts.

I agree the employee should be entitled to this - further more I have commenced development on a policy around incentive payments.