Can Companies Require Employees to Return Bonuses if They Leave Within a Year?

Hi All,

Can a company give a performance bonus to an employee and include a clause stating that if the employee leaves the job within a year, they must return the full bonus amount to the company?

Regards, Muniraju

I don't think so because when an employee performs well, the company pays them a bonus or incentive that cannot be retrieved even if the employee leaves or does not perform well in the future. Also, I don't think it will work. Instead of a performance bonus, the company can give a retention bonus after the employee completes the desired period, which will help in retaining talent.

Dear Muniraju,

Statutory bonus and performance bonus are two different things. If you are referring to a performance bonus, then it is linked with performance or you may link it with the tenure of the employee. You may also pay the performance bonus upon the completion of one year with the organization only. With this, neither do you require to add any separate clause nor do you need to recover any amount.

Dear Aniket & Manoj,

Thank you for your valuable answers. The answer is close to a retention bonus. Can we pay it at the beginning of the year? Please share a few more details on the retention bonus.

Thanks

No, please pay after completion of the said tenure. Retention bonus is not a liability if an employee leaves early. This could be very effective if you can be creative in designing the policy of retention bonus.

Dear Muniraju,

Performance and bonus are two different things. You cannot include any clause for the bonus that goes beyond the norms of the bonus act. However, you can mention a clause to control the performance-linked monetary benefits you may consider for the employee.

Regards

Performance bonuses should logically be paid after the desired performance is achieved. Prudentially, it should not be paid in advance on mere promises of performance.