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Payment of Wages Act

In January 2012 B&Q announced the withdrawal of a staff bonus scheme with effect from April 1st 2012. The bonus was payable in June each year (based on the previous August - January trading period) or in November (based on the previous February - July trading period) and had no performance conditions attaching to it. The contract of employment/employee handbook provided that the employer could amend or vary terms and conditions of employment from time to time and that all bonus schemes were discretionary and subject to scheme rules and could be reviewed or withdrawn at any time. The employees argued that the bonus payable in June 2012 related to a period they had already worked which was prior to the bonus scheme being withdrawn. The employer claimed that the bonus for that period had not been declared and they had a clear right to withdraw the scheme as it was discretionary.

McDermott J held that the employment terms must be interpreted reasonably and the discretion provided for must be implemented in a reasonable manner by the employer and in this regard the financial difficulties that they were experiencing meant the decision to withdraw the bonus scheme could not be regarded as unreasonable.  However it was also held that the employer could not withdraw the scheme retrospectively in respect of a period already worked and during which the employees had a legitimate expectation that the bonus was accruing and would be paid. Therefore it was deemed that the bonus in respect of the period August 2011 - January 2012 was payable in June 2012 notwithstanding that the discretionary bonus scheme had been withdrawn in January 2012.

McDermott J further determined that a "zone allowance" that was paid to Dublin based employees in respect of the higher cost of living in Dublin constituted an expense and therefore did not constitute wages as defined under the Payment of Wages Act.  The Employment Appeals Tribunal had correctly interpreted it as such and the withdrawal of it did not constitute an unlawful deduction under the Act.

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