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I negotiated a new package with my employer in June 2008.

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I got an email with...
I negotiated a new package with my employer in June 2008. I got an email with specified my new salary and that I was eligible to participate in the manager grade bonus scheme with an RRB of 25%. My new contract referred to a Manager handbook for additional terms and conditions. Regarding the bonus the handbook says that the employee has eligibility to participate in the RRB scheme but that the scheme is at the discretion of the employer and is non-contractual. In September 2008 everyone at my grade was informed that the RRB was being reduced to 20% but that everyone of that grade in April 2008 would benefit from a compensatory payment of 50% of salary. I believed that I was eligible for this as everyone was being compensation for their eligiblity for a 25% scheme being swapped for eligibility to 20% scheme. I also believe the the email summary of my agreed contract in June 2008 gave me entitlement to expect the 25% RRB and that I couldn't be excluded retrospectively in Sept 2008
Submitted: 8 years ago.Category: Scots Law
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6/15/2010
Lawyer: Ben Jones, UK Lawyer replied 8 years ago
Ben Jones
Ben Jones, UK Lawyer
Category: Scots Law
Satisfied Customers: 51,194
Experience: Qualified Solicitor
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Hi

 

1. Does your bonus entitlement now stand at 20%?

2. Were you at the same grade as everyone else affected in April 2008?

3. Have you been compensated with 50% salary?

4. Have you done anything about this since Sept 2008?

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Customer reply replied 8 years ago

1. Yes, OTE of 20% as compared to 25% previously.

2. No, I was then officially a grade below everyone else. The upgrading was part of my contract renegotiation in June which took effect in August.

3. No I have received no compensation.

4. I have made representations to the HR department but was pregnant at the time that the letter was issued and felt that continuing with the discussions then were too stressful and was nervous that I may jeopardise my right to return to work. I have just returned and feel that I now have to progress this or totally drop it.

 

I have attached the "buy out" letter below for your info - my grade is classed as "local leadership". The buy out resulted from the takeover of the company S by another, H and the aim to marry the various bonus schemes. Until the issue of this letter in October no indication had been made that the RRB would be affected.

 

 

3rd October 2008

 

 

Dear Colleague

 

Ref: Integration of Reward Schemes

 

You will probably be aware that, as part of the integration process following H's acquisition of S, we have been examining all aspects of our respective businesses to identify and implement a ‘best of both' approach.

 

As part of this exercise, we have been reviewing our reward schemes in the UK and comparing them to their H equivalents. This has proved a complex and time-consuming task, as H and S use different underlying approaches to evaluate and grade roles (for those of you familiar with grading methodologies, H use the Hay system and we use Watson Wyatt). At present, we are still in the midst of completing this work. This is worth being aware of as the reward schemes within H do differ for those roles classified as Senior Management versus Local Leadership roles. In essence, the differences vs the S reward scheme are as follows:

 

Senior Management (Job Grade 35)*

S

H

Difference

Annual Bonus

(RRB/Annual Incentive Plan)

25% on target

50% max

20% on target

35% max

-5% at target

Long Term Incentive Plan

(PSP/LTIP)

20% on target

30% max

7.5% on target

10% max

-12.5% at target

 

* Senior Management roles are most likely to be those roles graded as Job Level 16 within S and some of those roles graded JL15.

 

Local Leaders

S

H

Difference

Annual Bonus

(RRB/AIP)

25% on target

50% max

20% on target

35% max

-5% at target

Long Term Incentive Plan

(PSP/LTIP)

20% on target

30% max

No scheme

-20% at target

 

Our approach to reward integration is underpinned by the commitment given by H as part of the acquisition of S to maintain the value of our employees' existing terms and conditions. What this means for you is this:

 

If your role is classified as Job Grade 35 (i.e. Senior Management)

We will ‘buy out' the difference at target between your existing Leadership terms and conditions and your new H Senior Manager terms and conditions. A common approach to buying out terms and conditions, which we believe is appropriate in these circumstances, is to offer two years' worth of value, i.e. 2x (5% bonus + 12.5% LTIP) = 35% of your base pay. This would be paid to you in two instalments, with 15% payable in April 2009 and 20% in April 2010.

 

If your role is classified as Local Leadership

We will ‘buy out' the difference at target between your existing Leadership terms and conditions and your new Leadership terms and conditions. Applying the formula of two years' worth of value, you would receive 2x (5% bonus + 20% LTIP) = 50% of your base pay. This would be paid to you in two instalments, with 20% payable in April 2009 and 30% in April 2010.

 

The following conditions will apply to the payments:

  • 1. You will receive a gross cash payment that will be subject to Tax and National Insurance
  • 2. Both payments will be based on your reference salary as of 4th August 2008
  • 3. You must achieve an ‘Exceeds' or ‘Fully Meets' PDP rating (or the H equivalents) in the previous calendar year in order to qualify for a payment
  • 4. You must be employed by the H Group on the date of the payment

 

Additionally, you must have been in a Leadership role on the day of acquisition (28th April).

 

Whilst bonus arrangements are not, strictly speaking, either a term or condition of employment, we believe that the fair thing to do is to compensate you for the difference at target level between the two reward schemes. Of course, these bonuses are, by definition, variable, with no guarantee that target levels of payout would have been achieved, so this compensation is also designed to cover any other difference in benefits between the H and S reward schemes (e.g. Global Share Plan payouts and the Share Incentive Plan).

 

We will seek to provide clarity for you regarding your grading classification in the very near future along with further details on the H approach to reward and performance management. In the meantime, I hope you feel reassured that we will continue to provide you with an attractive, competitive and motivating reward package that reflects your contribution to our business achievements. Your commitment and endeavour is certainly not taken for granted.

Lawyer: Ben Jones, UK Lawyer replied 8 years ago
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