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Does an employer have to pay a terminated employee bonus if they where terminated the first day of a new quarter?

Robert O'Donnell's Profile


Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

It depends on what the policy or contract stipulates. Talk with your legal counsel.

(Agent, JKS Solutions, Inc.) |

Agree with Wayne, the policy definitions control.

In any event if you are forcing the separation you should err on the side of paying the bonus. This will go a long way to keeping the other potential issues that could arise at a low boil. How much is it really going to cost you to show some goodwill to avoid them wasting your time taking you to court? Cost benefit says pay them their bonus if you have failed to properly define your policy.

Topic Expert
Malak Kazan
Title: VP, Special Projects
Company: ERI Economic Research Institute
(VP, Special Projects, ERI Economic Research Institute) |

I would concur with plan terms control the subsequent administering of the payouts. Keep in mind, if the bonus is "discretionary" in nature (e.g. not tied to pre-determined individual performance targets), there is no "guarantee" of a payout. If it is clearly designed as an incentive, you many need to pro-rate it. Regardless of being employed during the performance period, many companies will include the clause "must be active on payroll" to receive payout. At the end of the day, you want to comply with the terms of the plan and not make exceptions that can raise issues of bias or "discrimination". Hope this helps.

Topic Expert
Keith Perry
Title: Director of Global Accounting
Company: Agrinos, Inc.
(Director of Global Accounting, Agrinos, Inc.) |

Concur with Malak, here. Check the bonus plan, and state rules, but the "must be employed through the end of the bonus period" is an enforceable clause, and needs to be enforced consistently.

Ted Monohon
Title: VP -Finance / Controller
Company: Fantex
(VP -Finance / Controller, Fantex) |

A word of caution on plans that state you need to be present on the day of payment in order to receive payment (as opposed to just being employed on the last day of the bonus period). Several states err on the side of the employee since the work performed for the bonus has been completed and it would be unfair to allow the company to benefit for that effort and avoid payment. This also goes for discretionary plans where the terminated person is the only one not being paid a bonus. I find it best to comply with the spirit in which the plan was designed and not get too picky about the exact language. If the person earned the bonus, pay it. However, this is truly a state employment law issue and if you want a proper answer, please ask your legal advisor.


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