The Christmas Bonus: What Employers and Employees Need to Know

Yes. Yes, we are talking Christmas in August. And for good reason.

Every year we emerge from our winter hibernation to find ourselves on a downhill slope towards Christmas. And pretty soon it’s December and we’re all spending way too much money. Of course, someone has to pay for that holiday at the beach and all the latest tech gadgets for little Joey. Unsurprisingly, this is when many companies find their employees lining up to receive their Christmas bonus. Only to be bitterly disappointed when they discover that they’re not getting the extra payment that they had so eagerly anticipated (and spent already). With the economic constraints of late, many companies are simply finding the payment of a Christmas bonus to be unaffordable. Things can turn sour rather quickly, with staff vehemently asserting that they have a legal right to their annual bonus and threatening the employer with retaliatory action. All this unpleasantness can be avoided if the employer sets the expectations in advance, well before down-payments are made and holidays booked.

Are companies legally required to pay Christmas bonuses?

Many employees expect to receive a bonus, and even believe that they’re entitled to the payment of a Christmas bonus in terms of South African labour law. Thus the first issue to consider is whether employers are under a legal obligation to pay a Christmas bonus or thirteenth cheque. The short answer to this question is: No. There is no legal requirement in South African labour law for an employer to pay a Christmas bonus.

But just because there is no general obligation in law to pay a Christmas bonus doesn’t mean your company is let off the hook. Just because there’s no legal obligation doesn’t mean there’s no contractual obligation.

Is my Company contractually required to pay a Christmas bonus?

To answer this question, you would need to look at what your company’s documents and past actions say about Christmas bonuses.

• Have any of your employees signed an Employment Contract that entitles them to a Christmas bonus?
• Have you given any of your staff an updated package that includes a Christmas bonus?
• Do your policies and procedures include an entitlement to an annual Christmas bonus?
• Is there any collective agreement in place giving staff the right to receive a Christmas bonus?
• Has your company historically paid Christmas bonuses consistently and without fail?

If the answer to any of these questions is “Yes” then you should consider consulting with a labour expert before unilaterally terminating the payment of Christmas bonuses.

How do I set Christmas bonus expectations?

Company documents: When compiling employment documents for your business, put a stop to any potential uncertainty by addressing the issue of bonuses head-on in the documents. So, ensure that your Remuneration Policy includes reference to annual bonuses, thirteenth cheques, and Christmas bonuses. If you want to retain flexibility on the payment of bonuses, make sure that your policies clearly state that the payment is discretionary and is, at all times, dependent on the company’s profitability and financial situation at the time.

Tackle the elephant: Tell your staff what to expect. Around this time of the year you probably already have a fairly good idea as to whether the company will be in a position to pay Christmas bonuses. If you don’t intend to pay a bonus this year, or if the bonus is substantially less than what you may have paid in the past, then perhaps you should let your staff know this. Long before they go spending money that they won’t be getting.

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.