It’s common for employers to specify that some of the employee benefits they offer are ‘discretionary’. The idea is obviously to retain the right to easily revoke them, or to vary them, without having contractual problems, needing to consult and seek consent before making changes.
It makes business sense to do that, but it’s not unheard of for a benefit the employer has seen as ‘discretionary’ to be found by a tribunal to have been contractual, or at least for an employee to challenge a decision to withdraw or change it on the basis they believe it is contractual.
So how can you avoid something you want to keep as discretionary becoming part of your employees’ terms and conditions.
An approach some employers take with this in mind is to avoid putting details of the benefit in writing. This can be seen sometimes with bonuses, commission schemes, and also with non-monetary benefits. Employers are sometimes under the impression that if something is not written down anywhere, it’s easier to get out of, and if they put something in a letter, email or contract, it becomes contractual and commits them to it.
This isn’t the case at all, and in fact it can be much easier to retain discretion around a benefit you’re offering if it is clearly set out in writing. If you do this, you can at the same time make absolutely clear that the benefit is discretionary only, and may be withdrawn or varied at any time. You can do this in the employment contract itself – just because something is written in the contract doesn’t mean it is in itself contractual, if the right to vary or withdraw is clearly indicated.
If you don’t write anything down at all, that clarity of intention is missing, and both the employee and potentially and employment tribunal will take what little evidence there is and interpret your intentions from that. Consistency and predictability of payment of a bonus or provision of a benefit may then lead to it being interpreted as a contractual thing, whereas if you’d set out your discretionary intentions in writing very clearly, that may not be the case.
In addition to making your intention for the benefit to be discretionary completely clear, and retaining a right to withdraw or vary at any time, the other step you can take to preserve the discretionary nature of benefits is to actively vary them from time-to-time.
If you have a right to vary clause for the benefits in the employment contract, exercising that clause fairly regularly will indicate that it is an active, meaningful clause rather than a catch-all simply inserted in an attempt to enable the employer to make drastic changes without consultation.
Exercising a right to vary will also accustom employees to changes, and reinforce the discretionary nature of benefits, so that as and when you want to make a change, it isn’t seen as such a big deal and is more likely to be accepted.
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