As noted in the Overview of Bonus Plans Practice Guide, this is an area in which specific and focused advice should be taken prior to including or referring to bonus plan language in an employment agreement in order to ensure that the applicable language accords with the intention of the employer.
Below are some general examples of bonus language.
In addition to the remuneration provided for above, the Employee shall be entitled to participate in any bonus, incentive and/or stock option plans as the board of directors of the Employer may determine, in their sole discretion, based upon the performance of the Employee or such other criteria as may be determined from time to time by the board of directors of the Employer.
You are eligible to participate in the Company’s Senior Management Bonus Scheme to the extent of 100% of salary, with:
- x% based on Worldwide Company achievement against EBITDA Target, with x% of this being non-discretionary and x% being discretionary (based on your individual performance objectives and key performance indications.)
- x% based on the Group’s quarterly cash targets (based on performance against quarterly cash targets).
The Employee shall be entitled to participate in the Bonus Plan, the details of which are set out in Schedule “A” attached to this Agreement. The Bonus Plan is based on the achievement of certain financial goals within the fiscal year of the Company.
- Consider if bonus will be payable if employment is terminated and the circumstances of the termination – for cause or not for cause
- What if the employee resigns?
- Consider if bonus will be payable during the reasonable notice period or limited to the last date of “active employment”
- When will amounts be paid?
- Consider stating that determination of bonus amounts within sole determination of the Company
- Any other issues peculiar to Company’s bonus plan?