Lack of contractual precision leads to director’s bonus dispute

A lack of precision in employment contracts, particularly when it comes to calculation of staff bonuses, can poison the atmosphere of any business. So it was in the case of one company whose finance director insisted he should have received the same bonus as its chief executive officer (CEO).

The finance director earned a salary of £100,000 a year and, under his contract, was entitled to annual bonuses ‘at a comparable level’ to those paid to other members of the board. In the year before he left the company, he was awarded a bonus of £86,000. He launched proceedings claiming entitlement to £50,000 more than that. He argued that the CEO had received a £136,000 bonus in the relevant year.

However, in dismissing his breach of contract claim, a judge found that that figure included a one-off payment of £50,000 as a reward for the CEO’s involvement in a particularly successful deal. That did not form part of his bonus and he had thus received exactly the same bonus as the finance director. The judge also found that the latter was present at a board meeting at which bonuses for the year were agreed but had voiced no objection at the time.

Contact: David Hacker