I have a number of employees who ask for their benefits and profit related pay to be drawn into their contract, I believe it helps with mortgage applications. My problem is that these benefits are never guaranteed. How do I deal with such requests or am I supposed to include? Whether you include benefits and bonuses etc into your employees’ contracts of employment is purely a matter for your discretion. You shouldn’t be influenced one way or the other by what your staff want in this situation, but should do what is best for your business. Putting the terms and conditions relating to benefits and profit related pay together with all of the other terms and conditions relating to your employees’ employment is not as simple as it sounds and you may be putting yourself at risk if you take action to do this but do not fully understand the implications. If you simply add these terms to the contract of employment of all of your staff members, and therefore make the benefits etc a contractual entitlement, what you are effectively doing is losing the scope of flexibility that you currently hold in regard to these matters. When you include a benefit as part of the employment contract, it means that your staff have a right to rely on its terms at all times. A contract is a set of promises between the parties involved and therefore you will be promising the benefit to your staff. It also means that, should any problem arise with the benefit and you are unable to provide it for any reason, your staff may be entitled to bring a claim of breach of contract against you. Keeping benefits and profit related pay outside of the scope of the contract of employment, and ensuring that your staff know they are offered on a purely non-contractual basis, provides you with much more flexibility to adjust the schemes when necessary. Adjusting a contractual scheme is not a quick and easy process so once you set the terms within your employees’ contracts you are stuck with them unless you can agree a change with your staff. Staff are not likely to offer their agreement to a change that will be to their detriment and your hand will be forced. If you know that you will always be able to stand by your contractual commitment to pay out based on profits and offer the benefits that you currently do, then there should be no problem in the future but the economic climate is unpredictable and retaining flexibility in these times is key. Explain to your staff that these benefits were included in their package on a non-contractual basis, which they accepted at the start of their employment and that is how they will remain. For further clarification and assistance then please contact the Peninsula Advice Service on 0844 892 2772.
Should benefits and profit related pay be included within contracts of employment?
September 16 2013
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