Bonus Payments for Employees

There are currently three types of bonuses which might be offered to employees when the contract of employment is signed between employee and employer.

Please note that the South African Labour Law makes no provision for the payment of bonuses to employees. The employer is not obligated to pay an employee any bonus. Payment of bonuses is a matter of negotiation between the employee and the employer.

An employer cannot be accused of unfair labour practices if the employer does not pay a bonus or 13th cheque to the employee, unless such a bonus was agreed upon when the contract of employment was signed between the employee and employer.

The three types of bonuses which some companies offer, is called the Christmas Bonus or 13th cheque, the Performance Bonus and the Production Bonus.

The Christmas bonus is actually paid to thank the employer for a job well done. Bonuses is paid at the sole discretion of the employer and is usually only paid to employees that has gone the extra mile in helping a company to succeed or increase revenue. This type of bonus is paid only to those employees who genuinely do the job well and go the extra mile.

The Performance bonus is paid for good performance. Based on the rules, performance bonuses are paid to a group of employees as a percentage of salary or as a lump sum that is split up equally between the employees of a specific department. Such a bonus is only paid where a group of employees is responsible for above-average and consistent performance in a department. The amount could also be paid as a percentage of the profit generated by the specific department.

A Production Bonus is usually paid based on meeting targets and quality of production. This means certain company specified targets must be met for the company to pay the bonus.

If the employer has agreed to include a bonus into the employment agreement, care must be taken to make sure that the employee understands the conditions under which such bonuses will be paid.

Employers should take note that any changes to a bonus payment agreement cannot be changed at will without consulting and negotiating with the employee first.