Bonus schemes typically provides for a bonus payment subject to an employee meeting certain conditions. Standards of performance, conduct, attendance are common conditions. The employer’s flexibility to select whatever ones it considers appropriate has been dented by the decision of The Employment Appeal Tribunal (“EAT”) in Land Registry v Houghton and others UKEAT/0149/14. It held that the Land Registry had discriminated against its disabled employees by having in place a bonus scheme that denied payment to employees who had received warnings during the year for high level of sickness absence. Despite the fact that the Land Registry had made reasonable adjustments by delaying the normal timing for issuing warnings for absence by the disabled employees, as the effect of the warning itself resulted in their automatic disqualification from the bonus scheme, this was disability discrimination contrary to the Equality Act 2010.

The facts involved the Land Registry operating a bonus scheme which provided that any employees who had received warnings during the year for high level of sickness absence would automatically not be entitled to a bonus. Having looked on as their colleagues were awarded bonuses in 2012, those disgruntled employees who had been denied a bonus due to their sickness record took their case to the tribunal. In a nutshell, their argument was that if it was not for their disability, they would not have been absent on sick leave and consequently would have received the same bonus payment. In essence, the EAT agreed.

The vital issue in this case was that the disqualification from a bonus payment was automatic and there was no discretion to disregard the absence warning on the employee’s record when determining bonus entitlement as the employer had done with other employees on misconduct warnings.

It is important to add that although the HR officer who was responsible for making the decision to withhold bonus was unaware of the employees' disabilities, this was considered irrelevant by the tribunal as the main issue was the bonus scheme rules which had meant that the disability-related absences had led to the non-payment of bonus.

The upshot of all of this is that employers should tread more carefully when applying any conditions to their bonus schemes to avoid any accusation that it is discriminatory. Adding discretion to bonus schemes is liable to give rise to uncertainty but attendance linked conditions in particular will require some further careful thought.