Cutting Back on Perks and Other Non-Essential Benefits

Author:Ms Susan Battye
Profession:LK Shields

Originally published August 2010

Despite some more positive economic forecasts, companies are still looking to make cut-backs where they can. Understandably the provision of perks and non-essential benefits may be in the firing line.

Non-essential benefits can be anything from a bonus, medical coverage or car allowance to things as small as a daily newspaper, lunch-vouchers, tea and coffee. It is also worth noting that employee entitlements to a bonus or benefit payments are referred to under the Payment of Wages Act 1991. The definition of "wages" under the Act includes "any fee, bonus or commission referable to that employment whether payable under his contract of employment or otherwise". It could be argued that a broad spectrum of discretionary benefits may be encompassed by this definition.

Legal Considerations

The first thing to be considered is whether the benefits sought to be removed are expressly provided for in the contract of employment. Another point which must be looked at is whether the benefit is discretionary as per the contract i.e. is it up to the employer to decide whether the benefit will be given to the employee? If the benefit is provided as a term or condition in the contract then an employer is not entitled to unilaterally change such a fundamental term or condition of the employment without the employee's consent. Employees' contractual entitlements cannot be unilaterally removed by the employer without giving rise to potential claims for constructive dismissal, unlawful deductions under the Payment of Wages Act, 1991 or a trade dispute under the Industrial Relations Acts 1946 - 2004.

However, employers must be careful to examine an employee's contract before any cut-backs are made and even where a benefit may be appear discretionary, the custom and practice of the organisation in the past should be taken into account as the employee might have reasonable expectations regarding such benefits or perks. A balance will also need to be struck between the cost benefit of withdrawing such benefits and the effect it will have on employees in terms of morale and their incentive to perform for the business.

If a perk is not contained expressly in a contract it may be implied into the contract of employment by taking into account the custom and practice of the industry. In the case of O' Conaill v Gaelic Echo it was held that because it was the custom and practice for journalists in Dublin to receive holiday pay it was an...

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