Payroll costs
Statutory Bonuses and Allowances
1. Two concepts that should not be confused
| The premium | Compensation | |
|---|---|---|
| Definition | A reward granted to an employee for exceptional effort | A sum paid to compensate for a duty or constraint related to the job |
| What Triggers It | Something the employee did beyond the call of duty | Something the employee endures as a result of their job |
| The rationale | To reward | Compensate |
The criterion that distinguishes them: the source of the event.
A bonus looks upward: it recognizes performance that goes above and beyond the ordinary. Without exceptional effort, it serves no purpose.
Compensation aims for balance: it offsets an inconvenience imposed by the job. It does not reward anything; it restores balance.
A practical consequence: using one in place of the other confuses the message sent to the employee and distorts the classification of the pay component in the event of a dispute.
2. Three Possible Sources
Bonuses and allowances do not all stem from the same source, and this source determines whether or not they are due.
| Origin | Nature |
|---|---|
| Legal | Mandatory |
| Contractual | Mandatory |
| Regulatory | Optional |
What this classification entails. A statutory or collective bargaining bonus is mandatory for the employer: it stems from the law or the collective bargaining agreement and does not depend on the employer’s decision.
A regulatory bonus is at the employer’s discretion. This is where the most delicate question arises in practice—the one addressed in the following section: once granted, can it be withdrawn?
3. The Elimination of a Bonus Established by Custom
3.1 The Problem
A bonus paid on a recurring basis eventually becomes established within the company. It has not been codified in any document, but it has become customary practice, and employees count on receiving it.
An employer who wishes to end this practice cannot simply stop paying it.
3.2 The Procedure: Three Mandatory Steps
When an employer intends to abolish a customary practice, they must follow a strict procedure that includes:
| The Step | What it ensures | |
|---|---|---|
| 1 | Notifying employee representatives | The workforce is informed before the decision takes effect |
| 2 | Individual notification of employees | Each affected person is notified personally |
| 3 | Compliance with a sufficient notice period to allow for potential negotiations | The elimination remains open to discussion before becoming final |
Why three steps and not just one? Each covers a different aspect:
- Informing representatives acknowledges that the benefit is a collective advantage;
- informing each employee ensures that no one finds out about it on their pay stub;
- granting a notice period means giving dialogue a chance to succeed.
Collective notification without individual notification leaves employees in the dark. Dual notification without advance notice presents everyone with a fait accompli. The three steps are not interchangeable.
3.3 Sanctions
If this procedure is not followed, the custom continues to take effect.
This is an unusual penalty, and its implications must be fully understood: there is no such thing as a belated or incomplete revocation—there is no revocation at all.
An employer who has omitted a step remains obligated to pay the bonus, exactly as before the attempt. And the employer remains obligated to pay it until the entire procedure has been completed.
The reasoning behind this sanction: The established practice derives its force from the trust it has created. Abolishing it without following the proper procedure would amount to betraying that trust without any compensation. The law does not prohibit it: it merely requires that the termination be announced, explained, and open to discussion. Otherwise, it is deemed not to have taken place.
The essentials in 5 points
- A bonus rewards exceptional effort; compensation offsets a duty or constraint related to employment.
- They may be statutory or contractual—and thus mandatory—or regulatory—and thus optional.
- A bonus that has become standard practice cannot be eliminated by a simple decision.
- Its elimination requires three steps: notification of employee representatives, individual notification of employees, and a sufficient notice period to allow for negotiation.
- Failure to follow this procedure means the practice remains in effect. The benefit continues to be fully effective.