Bonuses linked to sickness absence

It is generally accepted under case law that if a disabled employee suffers a disadvantage for having time off relating to their disability, this is a form of disability discrimination.  The EAT, in the case of Land Registry v Houghton and Others, was asked to consider if the withholding of a bonus payment from five disabled employees with high levels of sickness absence was discriminatory.


The Land Registry (R) operates a discretionary bonus scheme which states that if an employee has received a formal warning during the financial year, they would not be eligible to receive a bonus.  Formal warnings relating to conduct could be ignored at the manager's discretion, whereas formal warnings relating to sickness absence could not be ignored.  As such five disabled employees, all of whom had received formal warnings for absences relating to their disability, despite reasonable adjustments made by R, did not receive their bonus.

The five employees claimed that they had suffered discrimination arising from their disability and in defence R argued that the link between the disability and the non-payment of the bonus was too remote and that if there was discrimination, the discrimination could be objectively justified.

Tribunal decision

The Tribunal rejected R's argument that the link was too remote, using the words of the ECHR Code, which states that the non-payment was the consequence, result, effect or outcome of each employee's disability.  With regards to R's case for objective justification, the Tribunal accepted that R had a legitimate aim (which was to acknowledge employees' contribution and reward good performance and attendance) but found that the scheme in place was not a proportionate means of achieving that legitimate aim.  The scheme could not take into account the fact some of the employees had improved their absence record after the formal warning and that there was an anomaly in the scheme where warnings for conduct related reasons could be ignored but warnings for absence related reasons could not.

EAT decision

R appealed and the EAT found that automatic disentitlement to the bonus based upon absence related warnings amounted to unfavourable treatment in consequence of the disability.  Without the disabilities, the employees would not have had the absences, would not have received the warning and would have therefore received the bonus.


The take away point here is that whilst the Tribunal and EAT found that the scheme was discriminatory, had R allowed for more discretion under the scheme it may have been able to justify the scheme as a proportionate means of achieving its legitimate aim.  The main focus of the Tribunal and EAT decision was around the fact there was discretion to ignore warnings related to conduct issues but not to ignore warnings relating to absence issues. There was also no scope to take into account improved attendance, the latter contradicting the legitimate aim of the scheme.

Therefore, if you have a bonus scheme that is linked to attendance, you should ensure you have sufficient flexibility within the scheme to avoid withholding payment where this could be discriminatory.

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