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Attendance bonuses: the positives and the pitfalls

By June 26, 2019Top Tip
Attendance Bonuses | HR Solutions

Are you considering introducing attendance bonuses?

The rationale behind incentives and bonuses is clear enough. It is a sound one. Any scheme introduced by an employer to motivate staff and encourage them to perform at a higher rate is a good thing. In theory, yes, but in practice, certain bonuses can lead the employer into a very dangerous legal minefield.

Attendance bonuses used to boost attendance rates are a good example. Employers pay their employees a bonus for excellent attendance over a given period. This sounds completely acceptable on the face of it. However, if not carefully designed, attendance bonuses can indirectly discriminate against some employees.

Attendance bonuses cause indirect discrimination

The problem lies with the reasons for an employee’s absence; this needs to be taken into account, otherwise employers might leave themselves open to claims of indirect discrimination. The 2010 Equality Act states that no employee should face discrimination arising from a disability. An absence due to a pregnancy-related illness will also be protected under the Act.

Employment Appeal Tribunals judge in favour of workers

The story of an Argos warehouse telling agency staff that they stood to lose an 80p per hour pay ‘bonus’ if they took time off sick in the run up to Christmas captured plenty of media attention. The Argos example is far from an isolated case. In fact, several cases have been heard in recent years over attendance bonus issues. The judgements serve as a warning to employers as rulings have highlighted flaws in several employers’ attendance bonus schemes.

What to consider regarding attendance bonuses?

Employers should ensure that they avoid withholding an attendance bonus if this could constitute unlawful treatment. Any absence due to a pregnancy-related illness or disability should not affect the payment of a bonus.

Employers must also still meet their obligations under the National Minimum Wage Regulations and the Working Time Regulations – so the failure to pay an attendance bonuses should not take an employee’s wages below the appropriate NMW level for the hours worked. Those who regularly receive an attendance bonus as part of their normal pay, should have this factored into their holiday pay calculations.

The merits of attendance bonuses

Attendance bonuses are legal, and can work well if they are operated carefully. Many employers believe such a scheme motivates employees and has a positive impact on deterring short term absences that are avoidable. But their merits and overall effectiveness can be debated and so employers should carefully consider appropriateness and take caution. At worst, we can see that an ill-judged attendance bonus scheme has the potential to give rise to indirect discrimination or claims for failure to pay the NMW or the appropriate rate of holiday pay. In some cases they may also encourage presenteeism, and so employees who really ought to be taking time off may force themselves into work when really they are unfit.

It is important to remember that incentive schemes can deter general intermittent absence issues, but if there is a serious absence issue within your organisation or with a particular individual, then an incentive will not be addressing the true cause.

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