Attorney-at-law Annika Vait wrote in the economic journal Otsustaja how the right to pay bonuses may, surprisingly for employers, prove to be an obligation instead
The article by attorney-at-law Annika Vait was published in the June 2012 issue of Otsustaja and addresses a significant risk with respect to bonus payment schemes that became popular during the boom years.
The article contains a commentary on the position of the Supreme Court, which has found that bonus payment schemes established unilaterally by the employer may become binding in certain cases.
In other words, despite the fact that the right and not the obligation to pay bonuses is usually agreed on in the employment contract and the conditions for payment of bonuses are, as a rule, laid down unilaterally by the employer, bonus payment schemes may still become part of the wage system and therefore the employment contract. This also means that as an employment contract can only be amended via mutual agreement, the conditions on bonus payments cannot be changed unilaterally. If the preconditions for bonus payment are met, the employer may not unilaterally suspend or stop payment of bonuses nor establish additional preconditions for payment. In practice, employers tend to err in this quite often.
The article gives some practical guidance for employers to take into account in order to create a bonus payment scheme that would be flexible despite any possible fluctuations in the company’s economic indicators.
In addition to the paper edition, the article can be found at
Attorney-at-law Annika Vait is member of the Estonian Bar Association since 2008, she is also head of the transactions and corporate law practice of law firm Glikman & Partnerid.
Concerning the above, Annika can be contacted by phone at 686 0000 or by e-mail at Annika.Vait@ee.blslawfirm.com.
Glikman & Partnerid