Base salary of an employee is increasingly not the only element of remuneration. Often, employers decide to additionally awards and regulatory bonuses (see more) or other non-financial benefits, such as private medical care, a sports card or tickets for cultural events.
Awarding employee benefits is not so easy
When deciding whether to grant an additional benefit to an employee, employers must bear in mind its legal qualification. This is what often determines whether the employer will be obliged to pay such a benefit, as well as whether the parties to the employment relationship will be able to benefit from exemptions for Social Security contributions or income tax (PIT). The correct naming of the benefit, and often the precise definition of the conditions under which it can be obtained, can have a significant impact on employment-related costs and on the employer’s subsequent relationship with its employees.
#1 Regulatory bonus or award?
If the grant of the benefit depends on the employee’s fulfilment of certain criteria (e.g. the achievement of a certain annual target), it should be qualified as a regulatory bonus, the detailed rules of which should be included in the document defining it (e.g. remuneration regulations, employment contract, agreement with the employee). Once the conditions for receiving a regulatory bonus have been met, the employee may have a claim for its payment.
However, if we are dealing with a benefit granted at the employer’s discretion, it should be qualified as a award, the characteristic element of which is the fact that it is freely granted by the employer, regardless of the fulfilment of any objectives set for the employee.
#2 Private medical care and sports card
Similarly, other non-financial benefits that are granted to the employee regardless of the employee’s commitment to work (e.g. private medical care) would have to be classified as a award. They are certainly not benefits that depend on objective, individual or collective goals set for the employee, which in turn precludes their character as a regulatory bonus.
What about granting non-wage benefits only to employees with longer duration of employment?
The inclusion of benefits for an employee only after a certain stage of work has been completed (e.g. completion of a probationary period of employment) is a relatively common practice, which may be justified on technical (e.g. the need to conclude a private medical care contract for a period longer than 3 months) as well as practical (the employee does not receive a regulatory bonus for fulfilling certain results because he/she is not fully independent during the initial period of employment) grounds.
However, this issue raises some questions under employment discrimination legislation. Is it correct practice to grant benefits only after the employee’s probationary period?
This question has been answered by the Supreme Court. In its judgment of 14.03.2019 (II PK 310/17), it stated that it is permissible to differentiate employees’ remuneration based on their length of service, to which work experience is related. However, it is not permissible to differentiate remuneration twice based on the same criterion, i.e. first when setting the rate of basic remuneration and then by awarding additional remuneration components.
In practice, this means that employers should take a careful approach to the topic of employee benefits and precisely define their name, conditions for obtaining them and payment. Properly regulating access to benefits (both financial and non-financial ones) strengthens the organisational culture and can be a key factor in attracting employee talent, supporting the organisation’s image as a legitimate employer that cares about equal access to benefits.
So how to avoid allegations of discrimination?
As we know, an employee’s remuneration is not only the basic salary, but also all additional remuneration components, including other work-related benefits in monetary or non-financial form. Remuneration will therefore also include bonuses. Their award should respect the rules on the prevention of discrimination in remuneration.
The above has been confirmed not only in the context of granting benefits during the probationary period, but also with regard to any benefits granted during the entire employment.
The Supreme Court, in its judgment of 21.01.2011, case file ref. II PK 169/10, indicated that an award is a discretionary benefit, however, it is not a benefit granted at the full discretion of the employer. When deciding to grant an award to an employee, the employer is constrained by its obligation to apply objective and fair criteria for evaluating employees and their work performance, as well as by the principle of equal treatment of employees for equal performance of the same (or of equal value) duties.
A similar position was taken by the Supreme Court in its judgment of 22.02.2007, case ref. no.: I PL 242/06, indicating that in the case of differentiation of remuneration of employees performing equal work, it is incumbent on the employer to prove that he was guided by objective reasons. When invoking different professional qualifications and length of service, the employer must demonstrate that these were relevant to the performance of the tasks assigned to the employees.
Summary
The granting of additional financial and non-financial benefits to employees can be an important motivating factor for the Team and contribute to employees’ job satisfaction. It is crucial to apply objective and transparent criteria for granting benefits and to respect the principles of equal treatment of all employees. The answer to the question of whether and how to ensure equal access to benefits is certainly not that obvious, and given the practices and case law outlined above, it is worth taking a broader look at the issue by analysing the individual situation of the employer and its employees.
Our Labour Law Team will be happy to assist you in tailoring your organisation’s documents accordingly.
Notwendige Cookies sind unbedingt erforderlich, damit die Website ordnungsgemäß funktioniert./Necessary cookies are absolutely essential for the website to function properly./Necessary cookie są absolutnie niezbędne do prawidłowego działania witryny.
Alle Cookies, die für die Funktion der Website möglicherweise nicht besonders erforderlich sind und speziell zur Erfassung personenbezogener Daten des Benutzers über Analysen, Anzeigen und andere eingebettete Inhalte verwendet werden, werden als nicht erforderliche Cookies bezeichnet./ Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies./ Wszelkie pliki cookie, które usprawniają działanie witryny i są wykorzystywane w szczególności do gromadzenia danych osobowych użytkowników za pośrednictwem analiz i innych osadzonych treści, są określane jako non-necessary cookie.
