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BETTER BUSINESS

found that “15% of organisations such a bonus is paid in one go, it
have paid, or are planning to pay, could interfere with state benefits
such a payment to some or all their payments of low-waged workers and
workers, while a further 15% have leave them struggling to budget and
the matter under review. 18% of pri- make ends meet.”
vate sector firms are most likely to Nudds gives one more option –
have paid this bonus.” that “staff could be allowed to sell
Cotton refers to the autumn back unused holiday entitlement,
update of that publication which subject to the minimum 5.6 weeks’
found something similar. In over- paid annual leave, which cannot be
view, the numbers had decreased paid in lieu.”
slightly – possibly because the eco-
nomic situation had changed for the Staff loans
worse. Even so, it found that 14% of Many employers already offer staff
UK employers surveyed had intro- the option of an interest-free loan,
duced bonuses or allowances to cover often for the purchase of a transport
increases in the cost-of-living in the season ticket or to buy a motor vehi-
past 12 months and 13% are planning cle. Some employers have also
to do the same in the next 12 months. offered these to those who in finan-
There are risks to giving bonuses, cial difficulty with a link to financial
not least of which there’s the chance information and guidance. However,
that they could end up becoming as Cotton details, such loans are not
contractually due and may create simple ‘fire and forget’ options and
issues over how they should be given details the need to “consider HMRC
and to whom, along with how they regulations around interest-free
should be calculated. Here Marshall loans, what happens if an employee
explains that the key is to make leaves the organisation before paying
bonuses completely discretionary –
“If there is, or there becomes, a his- off the full loan amount, and whether
tory or pattern of making such those who have taken out loans for
financial reasons be offered financial
payments, the element of discretion
may be lost.” education and awareness courses.”
She adds that employees shouldn’t Marshall takes this further and
be given the expectation that they’ll says that employers can loan employ-
duct a successful review. She would start by setting clear objectives to work receive a bonus or have any hand in ees up to £10,000 each year with no
out what the firm wants to achieve. Next, she would identify employees’ its calculation: “This can be a com- tax consequences: “Essentially, the
needs: how they feel about existing benefits. Her third step is to conduct an plex area, so it’s best to seek advice company pays the employee a set
amount on a one-on-one basis with
external analysis and look at what competitors offering and how they com- such payments may be made more
pare. regularly, even if only annually, to the agreement that they pay it back
The fourth step means delving into the data to see which benefits are ensure no obligation to pay is cre- over a defined period.”
being utilised the most and which deliver maximum value for money. Fifth ated.” Administratively, she recommends
comes communication so that, post review, employees know what’s availa- But for Cotton, the advantages of that “employees sign a loan agree-
ble to them. Lastly comes the need to measure success and ROI to ensure cost-of-living bonuses are several - ment setting out the terms of the
the package remains relevant and affordable – perhaps replacing unpopular they can be given without perma- repayment, including repayment
benefits with new ones. nently increasing the wage bill; they term, authorisations for deductions
don’t flow through into other aspects from salary for repayments, repay-
And if change is necessary Marshall issues a warning: “From a legal per- of pay, such as overtime rates or pen- ment if they leave the company, and
spective, it’s important to make sure that any benefits that might be changed sion contributions; they can be tar- sanctions if the loan isn’t repaid”.
aren’t part of an employee’s contract of employment.” If they are, she says geted at those hardest hit by the There’s also the need for employers
that there’s a need to undertake consultation with the staff to get their agree- cost-of-living crisis; and because they considering offering such loans for
ment to make these changes in advance. are paid in one go, they can be more those in financial difficulty to think
useful in paying a large bill than about how these loans are described
Bonus payments? being spread over 12 months like a to staff. As Cotton explains: “Some
There has been a lot in the news about the UK government offering bonus pay rise. people might be put off from claim-
payments to public servants to both help them and stave off the threat of However, he highlights a key dis- ing them because of the stigma
strike action. On this Nudds considers one-off payments or tax-free vouch- advantage and rhetorically asks: “If attached; this can cause problems
ers to assist with rising bills and food prices an alternative to fully fledged inflation doesn’t fall in 2023, will later as these people might get into
pay rises, as are subsidised meals at work or facilitating car-share arrange- employees expect their employers to further financial difficulty, and it
ments. make another award to make up the becomes more difficult for the
She highlights the CIPD’s Summer Labour Market Outlook for 2022 that fall in their living standards? Also, if employer to help.”

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