Many modern employment contracts contain different types of remuneration and bonus payments take many forms – some regular, some annual and totally dependent on performance, and some conditional upon employment for a specific length of time. Some take the form of share options.
In a divorce, where the bonus is relatively small and predictable the court is likely to include it as part of annual income and make orders on this basis.
Often however the position is not so straightforward and in those cases a two tier maintenance payment may be made, in which a proportion of the basic salary is ordered as maintenance and then a separate payment in relation to the discretionary bonus based on what is actually received. It also depends a great deal on the parties needs as to how much of the bonus is to be shared. If for example a dependent wife and children, who have been used to a good standard of living, have established considerable needs for financial provision this may mean that the court needs to “invade” the bonus far more than would otherwise be the case in order to meet needs. If a wife with grown up children and fewer needs makes a claim and her husband usually gets a very large bonus, it is quite possible that he would retain that in full if her needs would not justify any payment from the bonus – there is no automatic entitlement to a share of a bonus.
Even if maintenance is not a consideration, bonus payments shortly after divorce can be a cause of contention if capital matters are being negotiated. The non bonus spouse may seek a share of the bonus accrued since separation as well as their share of the capital. Reported cases on this have sometimes excluded such payments all together whereas others have said that the bonus should be shared for one year only or have made an order for diminishing payments over a few years to allow a “run off”
The whole area of entitlement to bonus payments on divorce remains a discretionary area and one where specialist advice should always be taken from a family lawyer.
Our family law team advises families across the South West on the best solutions for them. If you would like to get in touch with the team about divorce or any other issue you can telephone 0345 450 5558 or email enquiries@stephens-scown.co.uk