Are companies legally required to pay staff an annual bonus or 13th cheque?

Every year between November / December (Christmas season) and January / February (end of the tax year) employers are faced with the same old challenge: employees start demanding “their” bonus or thirteenth cheque. Companies are asking “Must I pay my staff a Christmas bonus? Profit bonus? Performance bonus? Is the payment of a thirteenth cheque a legal requirement in South Africa?” Meanwhile, employees are asking “I didn’t get a bonus this year, what recourse do I have? Am I entitled to an annual bonus?”

There is often confusion around this, with many employees expecting payment of a bonus, and even believing that they’re entitled to the payment of an annual bonus in terms of South African labour law. The hapless employer often feels strong-armed into paying staff a bonus. But with the economic constraints of late, many companies are finding the payment of a bonus or 13th cheque to be increasingly unviable.

So right off the bat, here’s the short answer: there is no legal requirement in South African labour law for an employer to pay its staff an annual bonus or thirteenth cheque.

To answer the all-important question of “Is a company obliged to pay its employees an annual bonus or thirteenth cheque?” you would need to look, not in our labour law statutes and regulations, but in the company’s own paperwork:

• What does the employment contract say about the employee’s right to a bonus? Has any subsequent update in the employee’s terms of remuneration / package deal amended the terms of the employment agreement?
• What do the company’s policies and procedures say about bonuses and thirteenth cheques?
• Is there any collective agreement in place that deals with bonus payments?

The company would need to pay bonuses or thirteenth cheques in accordance with whatever agreement or arrangement has been reached and is recorded in these documents.

If these documents are silent on the matter, then see above – employees have no statutory entitlement to a bonus or thirteenth cheque. However – tread carefully here. If the company has historically paid its staff annual bonuses / 13^th cheques each year then the company needs to think twice, and preferably consult a labour specialist, before terminating this practice. If the regular payment of bonuses has become a company practice, the company cannot unilaterally change it without consulting with its staff. This could be viewed as an unfair labour practice.

Please note that this information is supplied for general information and does not constitute legal advice. It is advisable for you to contact a legal practitioner for guidance in respect of your unique requirements.