Complainant

Respondent

Anonymised Parties

A Food & Beverage Manager

A Café Bar

Representatives

None

IBEC

Act

Complaint Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under section 6 of the Payment of Wages Act, 1991

CA-00036518-001

04/06/2020

The complainant was the Head of Food & Beverage at the respondent Café Bar. He worked for the respondent between August 2017 and the 24th December 2019. He was paid a salary of €45,000 per year and this complaint relates to his bonus entitlement for 2019.

The complainant outlined that his contract of employment specified his entitlement to a bonus of 10% of any yearly increase in sales, subject to conditions. The respondent accepted that he was due a bonus for 2019. The respondent sent him its calculation of the amount of the bonus on the 13th February 2020, but this was done off the 2019 budget and not off the actual net sales. The respondent’s figure was €1,075,000 when it should have been €1,118,778.

The complainant outlined that he was paid a bonus of €3,412.24 when he was entitled to a bonis of €8,834.24. He raised this issue via his solicitor, incurring legal fees of €426.75.

The bonus was important in him taking up the role. The use of the budget 2019 figure was never discussed with him.  The Storm Emma days should not have been excluded from calculating the bonus.

The agreement was never revised so the contract should have been implemented. Any review should have been brought up with him.

The respondent outlined that the complainant was the head of food and beverage and this role expanded to include sales and improving quality. The respondent is a registered charity. The bonus was to be 10% of a net increase in sales with other conditions. Inter-department sales were not to be taken into account. Costs were to be taken into account. The respondent also reserved the right to amend the agreement.

The respondent outlined those sales had been dropping over a two-year period. 2018 was a poor year because of Storm Emma and a summer heatwave. The respondent outlined those sales had not increased compared to when the complainant started. The respondent offered a bonus payment based on the budgeted amount.

The respondent explained the position to the complainant in the letter of 13th February 2020. Inter-department sales and VAT had to be deducted. The respondent made the payment of €3,412.24 in February 2020. The respondent had concluded the matter so did not reply to the solicitor’s letter. The respondent submitted that the bonus was reasonable and was the only bonus paid to the complainant. The respondent could have relied on clause 14 not to pay the bonus at all but did so.

The respondent outlined that it had not availed of a bonus clause before. It had used the budgeted target for 2019 because sales had been so poor in 2018. The budgeted amount for 2019 was €1,075,000. The value of the sales, net of VAT, was €1,118,778, so a difference of 43,000.

The respondent outlined that the agreement allowed it to take account of days the venue was closed, i.e., not account in 2019 for the four days the venue closed in 2018 for Storm Emma. This would lead to a reduced bonus of €6,165, but the complainant was not entitled to this amount because 2018 had been so poor.

The respondent outlined that had the complainant increased sales in both 2017 and 2018, it would have been more comfortable in 2019 to pay the bonus per the contract. To be reasonable and fair to the complainant, it was calculated off the budget.

The respondent outlined that the complainant raised the issue of his bonus when he was resigning. It was submitted that the respondent was entitled to pay less of a bonus then it did, because of the closures and the reduced summer attendance. It did not accept the complainant’s estimate of a bonus of €8,834.24.

This is a Payment of Wages Act complaint relating to the complainant’s bonus entitlement for 2019. The respondent paid a bonus of €3,412.24 and the complainant asserts that he is due more of a bonus. The complaint is that the underpayment of the bonus is an unlawful deduction in the complainant’s wages.

The parties signed a detailed 14-point bonus agreement on the 23rd August 2017. This provided for the annual payment of a bonus in January of each year in respect of the preceding year, should the conditions set out in the agreement be met. It stipulates that the amount of the bonus would be 10% of any increase in sales over the previous year, net of VAT. It set out conditions, for example inter-department transactions not to be taken into account, gross margin must remain static, and costs and payroll to stay within budget. It states that the bonus is for an increase in sales over and above the previous year.

Clause 7 of the agreement addressed situations where the venue had to temporarily close for reasons not within the control of the complainant, for example temporary closures because of severe weather warnings.

There was an increase in sales between 2018 and 2019 and the respondent points to 2018 being a difficult year, with, for example, the business being closed because of Storm Emma. The respondent calculated the complainant’s 2019 bonus from the actual sales in 2019 to the budget for 2019, not from the actual sales in 2019 and the actual sales in 2018.

Having considered the evidence and submissions of the parties, I find that the bonus agreement was part of the contract of employment. I note that it was signed at the commencement of the complainant’s employment and on the same day as the complainant’s terms and conditions. It is a detailed, considered document that covers many eventualities. The core term is that it is based on the increase in sales over and above the previous year.

I find that the respondent was not entitled to change such a core term when calculating the bonus for a previous year. It might have been open for the respondent to change the term for a following year (so in January 2020, the respondent could change how the bonus was assessed for that coming year), but it was not open for the respondent to change the term to have retrospective effect.

It follows that the bonus should be assessed according to the terms of the agreement, i.e., the increase in sales over and above the previous year, net of VAT and subject to the conditions in the agreement.

The actual sales for 2018 were €1,038,579 and the actual sales for 2019 were €1,118,778; the increase is €80,199. The respondent accounts indicate that the adjustment for internal sales as €3,652; the adjustment for closures was €9,995 (in line with clause 7) and the adjustment for costs was €4,900. This reduces the figure to calculate the bonus from to €61,652. 10% of 61,652 is €6,165.20.

Given that the complainant was paid a bonus of €3,412.24, he is entitled to the difference between the two amounts, €2,752.96. This is an award of compensation pursuant to the Payment of Wages Act. While I note that the complainant paid legal fees in respect of correspondence, in the circumstances, I consider the above to be a reasonable award.

CA-00036518-001

I decide that the complaint pursuant to the Payment of Wages Act is well-founded and the respondent shall pay to the complainant compensation of €2,752.96 within 42 days of the date of this decision.

Payment of Wages Act / bonus