Employment Law Update: When Is A "Discretionary Bonus" Discretionary?

The High Court recently held that B&Q was not entitled to withdraw a discretionary bonus scheme in circumstances where the employees had a legitimate expectation that their bonuses were accruing and would be paid. This decision raises an interesting question for employers – namely, when is a discretionary scheme really discretionary?

In January 2016, the High Court upheld an appeal brought by 10 B&Q workers against a decision of the Employment Appeals Tribunal ("EAT") that the removal of a bonus, which had been paid for several years up to early 2012, was not a deduction of pay in breach of the Payment of Wages Act 1991.

Up until 2012, the employees were eligible to receive a Winter/Summer bonus under B&Q's discretionary bonus scheme. The bonus was paid twice annually. The first payment was payable in June, for the work period August to January.  The second payment was payable in November, for the period of February to July.  The employees' contracts of employment