employment contract

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Adam

Your question is really an accountancy/finance question that falls outside Workplace Law?s main area of expertise; we cover the legislative and ?best practice? aspects of managing a workplace ? employees, premises and health and safety. However, I?m happy to help if I can on some of your points.

The key difference between a bonus and a profit share scheme is that the latter would only be paid from any profit a company makes, while a bonus scheme may well pay something to an employee even if the company/division did not make a profit. The details of what you pay, and over what period bonuses are assessed, are a matter for you to agree with your staff individually. If the bonus scheme is not based on clear and measurable targets, then you might want to include a phrase such as ?at the company?s discretion? in the details you give to your employee, since they will form part of their contract of employment. You might need to bear in mind also that if the same bonus is regularly paid to staff, it can become in effect part of their contractual benefits through ?custom and practice? even if it?s not mentioned in their employment contract or elsewhere. It?s always best to put details of employee benefits such as this in writing to avoid any problems.

For advice on the best ways to set up a bonus/profit share scheme for your particular business, I think your best source of guidance might be one of the accountancy websites, or the services of your own accountant.

As a sole trader running a private architectural practice with 3 employees, I am making one person an 'Associate', and considering a profit-share scheme for him. Are there different ways of going about this that will allow me to retain control over amounts paid? Is it feasible to 'ring-fence' certain projects (ie confine the profit-share to new business)? Are there different approaches to/mechanisms for profit-shares? How do these differ from bonus schemes? Can I operate this without divulging the practice's full financial details to him? Is there a good way of incorporating this in a standard employment contract? What are the pit-falls?