We have an employee out on maternity leave and her contracts states she is entitled to a performance related bonus. Should this be pro rata given she has been on maternity leave for a significant period of the year or is her leave deemed to be 'protected' under maternity and therefore entitled to full bonus payment?

Posted in : First Tuesday Q&A ROI on 2 February 2016
Zelda Cunningham
Arthur Cox

Under the Maternity Protection Acts 1994 to 2004, employees on maternity leave or additional maternity leave are entitled to all rights as if they were still at work, other than the right to remuneration. 

The issue of the status of incentive payments/bonuses during maternity leave has been the subject of a significant volume of European and UK case law and these are instructive regarding the legal position but there is no definitive judicial decision in Ireland on the subject.

The question relates to performance related bonuses, as opposed to bonuses payable in respect of ongoing status as an employee (e.g. loyalty bonuses, or bonus paid as a future incentive to remain with the employer). 

In Lewen v Denda, [1999] E.C.R. I-7243, the Court of Justice of the European Union held that pursuant to the Pregnancy and Maternity Leave Directive (which unlike the Irish Act, refers to "pay" rather than "remuneration"), where a bonus is awarded for work performed in the previous year, the bonus does constitute "pay" (as it forms part of an employee's normal remuneration and salary) and so it falls within the category of "pay", to which the employee's entitlement does not continue during maternity leave.

Therefore a woman on maternity leave does not have an entitlement to that part of the bonus which refers to the period of time during which the employee was absent on maternity leave. However where an employee was absent on maternity leave only for part of the reference period, the employee should not be deprived completely of such a bonus but the employer is required to pay a pro rata amount to reflect the proportion of bonus applicable to the time she was at work.

However, it cannot for the purposes of the calculation, include the period (of ordinary maternity leave) during which the employee is prohibited from working due to pregnancy (currently four weeks either side of the expected week of confinement). 

Additionally, if a bonus is based on performance which an employee has already completed prior to taking maternity leave, but which falls due to paid whilst she is on maternity leave or additional maternity leave, the bonus should be fully paid to the employee.

Please note that the above analysis relates to performance bonuses only. If a bonus is related to factors other than performance (for example the employee’s ongoing status as an employee, company profits, flexibility in relation to restructuring or as a bonus due to a firm transferring locations), then having regard to European case law, such a bonus would not be classified as “pay” within the meaning of the Pregnancy and Maternity Directive and therefore should be paid in full to the employee.

In these circumstances it would be discriminatory on grounds of gender to withhold or to pro rate such a bonus in relation to employees on maternity leave or additional maternity leave.

Back to Q&A's This article is correct at 02/02/2016
Disclaimer:

The information in this article is provided as part of Legal-Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article.

Zelda Cunningham
Arthur Cox

The main content of this article was provided by Zelda Cunningham. Contact telephone number is +353 1 618 0000 or email zelda.cunningham@arthurcox.com

View all articles by Zelda Cunningham