When an employee is absent on long-term sick leave, their entitlement to benefits (including bonuses) will be governed by their contract of employment, alongside their employer’s statutory sick pay scheme and internal policies.

Generally speaking, performance-related bonuses are enshrined in an employee's contract of employment and require certain criteria to be fulfilled by the employee in order for them to become entitled to the bonus. Often, such bonuses will be calculated by reference to objective performance criteria (either on the part of the individual employee themselves, the business as a whole or a combination of both). However, there is also potential for the criteria to be much more subjective, taking into consideration a more general assessment of the employee's day-to-day performance. Employers should note that when drafting their employment contracts, the greater the degree of subjectivity in regard to the criteria to be fulfilled, the greater the scope for a disgruntled employee to dispute their bonus award, or lack thereof.

This risk of dispute is further amplified where the relevant employee has been out on sick leave during the time frame considered for the purpose of calculating such bonus. This is due to the fact that, depending on the circumstances of the case, the employee may be eligible to bring a Tribunal claim for discrimination on the grounds of disability against their employer, under the Disability Discrimination Act 1995.

As such, when assessing an employment contract and the employer’s surrounding policies and provisions, employers must proceed with caution and seek legal advice in any instances of uncertainty.

Here are some key points for employers to consider in this situation:

• The Terms of the Employment Contract: Does the contract explicitly state anything with regard to attendance within its criteria? If so, the employee may not be entitled to the bonus. However, if the contract remains silent on this point, there may be grounds for the employee to argue that they are entitled.
• Company Policy: As an employer, you should have a bonus policy in place to govern the award of all bonuses. When examining this policy, look out for any specific provisions regarding employees who are absent due to sick leave. Are there provisions allowing the bonus to be pro-rated based on the time worked?
• Usual Practice: How has the company dealt with bonuses due to employees on sick leave before? Consistency is key in such situations, as departing from normal practice can leave the employer open to discrimination claims. As such, if the employer has historically paid out bonuses to employees on sick leave, they should continue this practice.

Overall, employers should ensure that company policy and employment contracts give adequate consideration to such situations and that the terms of any existing policies or employment contracts are complied with at all times.

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