9 December 2020 by and Employment Law Alert

On the first day of Christmas, my employer said to me, “No thirteenth cheque!”

As we slowly creep towards Christmas, and in light of the devastating financial impact that the COVID-19 pandemic has had on businesses and the economy, employees will most certainly be questioning whether they will be receiving their thirteenth cheque. Employers, on the other hand, will be asking whether or not they can afford to pay the thirteenth cheque this year, a sudden doubling in employee costs. Employers will therefore be considering their position in relation to the payment of a thirteenth cheque to its employees.

The starting point is to consider whether the payment of this bonus is a guaranteed right, either in terms of an employee’s contract of employment or an employer’s remuneration or bonus policy. If the bonus is not dependent on the exercise of any discretion at the instance of the employer or the attainment of performance related objectives, then such a bonus should ordinarily be payable. Absent such a right, there is no legislation within South Africa which obliges employers to pay bonuses to its employees. Hence, the right must either be agreed at the time of contracting or bargained for, either individually or collectively, and subsequently agreed to. Typically, the thirteenth cheque is contractually guaranteed and therefore becomes a payment that the employee is entitled to, as a right.

In Aucamp v SA Revenue Service (2014) 35 ILJ 1217 (LC), the court stated that bonuses which are part of remuneration, for example a thirteenth cheque and other guaranteed bonuses, are examples of bonuses which employees receive because the employee is contractually obligated to provide services to his/her employer. The court held that the employee is entitled to be paid this kind of guaranteed bonus for tendering service and whilst the employee remains employed, and there is no real nexus between the specific work to be done and the bonus. The court held that the moment there is a direct nexus between the payment of the bonus and the performance of actual and designated work to be done, or the content thereof, or the discharging of such actual work, or the standard of the work so discharged, then the bonus is a quid pro quo for the nature and fulfilment of the work itself and not simply for working per se.

Where an employer and employee had entered into a contract of employment and/or collective agreement that contains any provision regarding the guaranteed payment of bonuses, an employer would need to ensure payment is made in terms of such contract/collective agreement. Unfortunately, whether or not the employer can afford the payment is irrelevant as failure to make payment of the guaranteed bonus may be seen as a unilateral change to the provisions of the employment contract.

If an employer is unable to pay bonuses due to financial constraints or for any other valid reason, it is advised that the employer enter into negotiations with the employees and obtain their consent. Alternatively, if the employer has entered into a collective agreement, it can approach the Bargaining Council to establish whether it may apply for exemption of paying the thirteenth cheque. Failure to do so might result in the employee taking legal action against the employer for breach of contract.

An employer cannot unilaterally force the employee to sacrifice their thirteenth cheque. Failure to receive consent from the employee or Bargaining Council affords employees an election to either accept the breach of contract and sue for damages or enforce the contract through specific performance as the employer has breached a clause of the employment contract. Alternatively, the employee can refer a dispute to the CCMA concerning the failure to pay an amount owing to the employee in terms of their contract of employment or collective agreement.

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