Executive Bonus Not Paid When You Leave: Notice, Garden Leave and PILON
This article is for you if:
your employer says leaving means losing an annual bonus or commission;
you are on notice, garden leave or receiving payment in lieu of notice (PILON); or
the company calls the award “discretionary” but performance targets were met.
A bonus dispute is usually a document-and-dates problem. “Bonus” may mean a contractual formula, a discretionary award, commission, deferred cash or several of these at once. Do not negotiate them as one number.
Start with the actual rule
Acas distinguishes contractual and discretionary bonuses. If agreed contractual criteria are met, the bonus should be paid. Discretion gives an employer flexibility, but Acas says it must still act fairly and reasonably. Many executive schemes are hybrids: company results set the pool, then a committee decides individual allocations.
Create a row for every payment and identify where discretion actually enters:
Question | Evidence to use | Why it matters |
|---|---|---|
What creates entitlement? | Service agreement, scheme and award letter | A target email may not contain the leaver rules |
When is it earned? | Performance, award, vesting and payment dates | These are not necessarily the same date |
What excludes a leaver? | “Employed”, “not under notice” and cause clauses | Each phrase creates a separate test |
How is it calculated? | Accounts, scorecard and committee minutes | Revenue and EBITDA may have special definitions |
Caira can help you upload the service agreement, bonus plan, award letters and a calculation spreadsheet, then arrange the competing clauses and dates in one table.
Garden leave and PILON are different
On garden leave, employment continues. Acas says usual pay and contractual benefits should continue, although a scheme can separately exclude anyone “under notice”. With PILON, employment normally ends immediately. The PILON clause may cover only basic salary, or a wider set of benefits; it does not automatically include a bonus.
Consider three outcomes.
A managing director completes the performance year, resigns in January and remains employed on garden leave until April. A March payment-day condition may be satisfied, but a separate “not under notice” condition may still exclude the award.
A sales director is dismissed in February with PILON before a March payment date. Their employment has ended, yet commission already earned on signed or paid transactions may remain a separate contractual sum.
A divisional CEO is made redundant nine months into the year. The plan says the committee “may” make a pro-rata good-leaver award. Nine months does not mechanically create 75%; the question is whether the committee considered the discretion under the correct rule and evidence.
Test the decision and calculation
The Court of Appeal in Horkulak v Cantor Fitzgerald treated contractual bonus discretion as constrained by honesty and rationality. But Commerzbank v Keen shows why clear payment-date and notice conditions matter. High performance alone does not override a valid leaver clause.
Build a chronology containing the performance year, targets, resignation or dismissal, notice, garden leave, termination, committee decision, award, vesting and payment. Then reproduce the employer’s calculation. If EBITDA is the metric, ask for the bridge from management accounts to the scheme definition. Compare genuine equivalents—not colleagues with different roles, targets or years.
Caira can turn that material into a plain-English issue list and help draft a factual request for the missing decision record or calculation.
In any settlement proposal, separate salary, holiday, notice, commission, annual bonus, deferred cash, equity and the additional termination payment. The Acas settlement template deliberately distinguishes ordinary sums due from compensation for ending claims.
Questions people hesitate to ask
“Discretionary” means they can pay zero for any reason, right?
No. It may reserve wide choice, but the precise discretion must be exercised for its contractual purpose, not arbitrarily.
Can I count my bonus as part of the tax-free £30,000?
Usually not. Salary, commission, bonus and notice pay remain employment earnings; do not merge them with a separate termination award.
Is a friendly promise from my manager enough?
It is evidence, not the whole answer. Match it against the plan, the manager’s authority, any committee approval and the written award.
You can test the documents with Caira through a 14-day free trial, then plans from about £15 a month.
This article is general information, not legal, financial, tax or medical advice.
