UK: Employers may withhold discretionary bonuses even where performance is satisfactory

January 12, 2010

When determining whether to award a discretionary bonus or not the key issue for the Courts to look at is whether the employer’s decision was irrational or perverse and not whether the employees performance was sufficient to justify a bonus.

Legal Position

Where a bonus scheme is discretionary the employer does not have a complete discretion over whether to refuse to award a bonus.  The employer cannot exercise his discretion in a way which is irrational or perverse.

Case Summary

In this case an employee’s bonus was related to his performance, as determined by the management board.  During the 3 years preceding the year in question the employee had received a good appraisal and substantial bonuses.  In the year in question the employee’s fixed term contract came to an end and he received no bonus and he subsequently brought a claim against his former employer for payment of a sum equivalent to his bonus.

The employee was an economist and he was responsible for forecasting nickel prices.  In the year in question his forecasts were badly wrong, although no more wrong than that of other leading economists, as a result of the global economic crisis.  As a result of this inaccurate forecast the employer made a significant loss and the employee received an unsatisfactory performance rating.

It was held that in the circumstances the employer’s decision not to pay a bonus was not irrational or perverse.  The employee was not permitted to use the failings of other economists or the global economic crisis as a justification for his entitlement to a bonus.


It is interesting to note that the court held that the global economic crash should be taken into account when determining whether the employer’s discretion had been exercised rationally.  This appears to conflict with previous decisions of the Court of Appeal and the High Court which had held that the global economic crisis was not relevant in determining employees’ contractual bonus entitlement.


Humphreys v Norilsk Nickel International (UK) Ltd [2010] EWHC 1867 (QB)

For further information or to discuss the issues raised, please contact Guy Abbiss ( or Stephen Wright ( on
+44 20 3051 5711.

Abbiss CadresCELIA Alliance


CELIA Alliance
CELIA Alliance members are identified here. Members of the CELIA Alliance are each independent law firms and do not practice law jointly with any other member of the CELIA Alliance. “CELIA Alliance” and “CELIA” are not trading names. For more information about the CELIA Alliance click here.

Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this newsletter. For further legal information click here.

If you would like to copy or otherwise reproduce this article then you may do so provided that: (1) any such copy or reproduction is for your own personal use or if it is made available to any third party it is done so on a free of charge basis; and (2) the article is reproduced in full together with the contact details, disclaimer and any logos as they appear on each article.

Leave a Reply

Your email address will not be published. Required fields are marked *