Employee Bonus Plans – Ensuring Compliance in California

Employers often design and implement Employee Bonus Plans to motivate employees to work hard and achieve company-set goals, be it sales targets, high marks on customer satisfaction surveys, or any other system of measuring achievement. Employee Bonus Plans are also a tremendously effective way to improve worker morale. Often, employers retain employment attorneys to draft these bonus plans in order to maximize effectiveness and to ensure compliance with local, state, and federal employment laws. In order to accomplish those goals, attorneys should pay careful attention to the following provisions.

* Purpose / Objectives: The purpose or objectives of the employee bonus plan should be laid out at or near the top of the plan. It is important to let employees know that the bonus plan is designed to reward employees for their contributions to the successful achievements of corporate goals and to share the success of the business with employees.

* Administration: The Employee Bonus Plan should let the employee know who is administering the plan and who will be setting the performance objectives, be it the Chief Executive Officer, the Director of Human Resources, or a team of executives.

* Eligibility: This provision should let the employees know which categories of employees are covered. Is this a bonus plan for the rank-and-file workers or for executives? Is it only for full-time employees, or are temporary and part-time employees, interns, and independent contractors involved as well? This provision should clarify which employees are eligible for the incentives described in the bonus plan.

* Confidentiality: Employers may want to include a confidentiality clause in their bonus plan. If so, this provision should state that participation in the bonus plan and all related discussion and documentation should be considered fully confidential between the company and the employee. All employees should be expected to honor this agreement and promise not to discuss or disclose bonus plan matters with any persons other than his or her manger or human resources.

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