Mr S SharmaClaimantVedanta Resources LtdRespondent
Before
Employment Judge DuffMs Murphy (instructed by Counsel) for claimantMs Rumble (instructed by Counsel) for respondentDate 5 June 2025
JUDGMENT
[1]The complaint of unauthorised deductions from wages is well-founded. The respondent made an unauthorised deduction from the claimant's wages by deducting £90,000 from the performance bonus he was legally entitled to at the end of the 2023-2024 financial year on 31/03/24.[2]The respondent shall pay the claimant £90,000, which is the gross sum deducted. The claimant is responsible for the payment of any tax or National Insurance.[3]Had the claim for unauthorised deductions failed, the claim for breach of contract pleaded in the alternative on the same facts would have succeeded.[4]The claimant’s claim for financial loss (increased mortgage payments) attributable to the unauthorised deduction is dismissed as withdrawn. Notice Pay[5]The claim for notice pay is dismissed as withdrawn. Holiday Pay[6]The claim for holiday pay is dismissed as withdrawn. Wrongful Dismissal[7]The claim for wrongful dismissal is dismissed as withdrawn.
REASONS
[1]The claimant brings this claim against his former employer, Vedanta Resources Ltd, with whom he was employed as a Director of Corporate Finance between 03/04/2023 and 15/02/2025.[2]Initially, the claimant brought claims for unpaid holiday pay, unpaid notice pay, wrongful dismissal, unlawful deduction from wages (breach of contract in the alternative) and financial losses sustained as a result of the same.[3]At the outset of the hearing, the claimant confirmed his claims for unpaid holiday pay, unpaid notice pay and wrongful dismissal were withdrawn. Those claims are therefore dismissed as withdrawn.[4]At the close of her submissions counsel for the claimant also confirmed that he no longer wished to pursue the increased mortgage payments he claimed he was subjected to as a loss consequential to the alleged unlawful deduction of wages. This claim is also dismissed as withdrawn.
Law
[5]By s13 Employment Rights Act 1996, “An employer shall not make a deduction from wages of a worker employed by him unless(a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker’s contract or(b) the worker has previously signified in writing his agreement or consent to the making of the deduction.”[6]By s13(3) ERA 1996, “Where the total amount of wages paid on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion… the amount of the deficiency shall be treated for the purposes of this part as a deduction made by the employer from the worker’s wages on that occasion.”[7]By s27(1)(a) ERA 1996, wages means ‘any sums payable to the worker in connection with his employment, including any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise’.[8]In New Century Cleaning Co Ltd v Church [2000] IRLR 27, the Court of Appeal held that, for wages to be “properly payable,” the worker must have a legal entitlement to them.[9]In Kent Management Services Ltd v Butterfield [1992] IRLR 394 EAT, the EAT held that discretionary and ex gratia payments are wages if there is a reasonable expectation that the worker will receive the payment.
Evidence
[10]The Tribunal heard evidence from the claimant that was in line with the contents of his witness statement dated 23/05/25. At the outset of his evidence in chief the claimant helpful provided some additional context to the conversations with the respondent that occurred around the time his contract of employment was signed, and regarding the Bonus Policy documents contained within the bundle. The reasons for this additional evidence were the late serving of the documents (on 23/05/25) and the respondent’s witness statements (on 02/06/25). The claimant did not in fact see the documents until they, and the witness statements, were provided to him by his solicitors on 02/06/25.[11]The claimant was a helpful and straight forward witness. He gave his evidence clearly and consistently and was transparent about where he could not answer a question, and the reasons why. The respondent was unfortunately hampered in the provision of its evidence as neither of its witnesses were able or willing to attend the hearing: Mr Agarwal because he resides in India and the necessary permissions had not been obtained in time; Mr Kumar indicated to the respondent this morning that he was no longer will to attend the tribunal to give evidence, despite only having signed his witness statement four days ago on 01/06/25. The respondent declined to apply for an adjournment or to seek an order compelling Mr Kumar to attend, as they did not wish to cause delay to the proceedings. In doing so they acknowledged that there was a limit to the weight the tribunal can place on Mr Agarwal and Mr Kumar’s evidence.
Facts
[12]The heart of this claim boils down to a factual dispute between the parties as to whether the claimant had an entitlement to a bonus under the terms of his employment, and if he did, whether the terms of that bonus were discretionary and/or whether that discretion had been applied in a fair and reasonable manner.[13]Both parties agree the claimant’s base salary was £165k. The dispute arises over the awarding of a bonus payment for the 2023-24 financial year which, in the respondent’s company, ran from 01/04 to 31/03 every year.[14]On 28 March 2023, the claimant received an email from Madhu Srivastara, the respondent’s Head of HR, attached to which was an offer letter of employment, a draft document entitled ‘Statement of Main Terms of Employment’ and a slide containing a purported breakdown of the bonus scheme payment.[15]The tribunal does not have before it any further email correspondence discussing these documents. However, the claimant’s evidence was that this email prompted a telephone conversation with Ms Srivastara on 30 March 2023. The final contract differs in some minor respects to the draft contract, so the tribunal has no trouble in finding that further discussions and contract negotiations must have taken place, despite the lack of a written record of them. There is no difference between the draft and the final version regarding the ‘remuneration’ section, which lists only the claimant’s base salary of £165k, and makes no mention of a bonus scheme or payment. The respondent contends that there is therefore certainly no contractual, and therefore unlikely to be any legal entitlement to a bonus payment under the claimants’ terms of employment. They also allege that the claimant made no attempt to amend the draft contract to include reference to a bonus payment.[16]The claimant alleges that the statement of main terms must be taken together with the offer letter in order to ascertain the true content of his contract of employment. He relies on the following: i. The appointment letter accompanying the statement contained the following at numbered paragraph 1: ‘The Total Target Remuneration is £315,000 (Three Hundred and Fifteen Thousand GB Pounds only) which comprises of: a) Base Salary: You will be paid an annual base salary of £165,000… b) Annual Performance Bonus: You will be paid an annual performance bonus for the first year up to a maximum of GBP 150,000…First year payout will be pro-rated basis date of joining. You will be eligible for payout basis achievement of agreed deliverables/KPI’s applicable from time to time. You will be required to agree with your manager on the deliverable on joining.’ ii. The appointment letter accompanying the statement contained the following at numbered paragraph 5: ‘You will be covered by the General Terms and Conditions (Annexure – 1) applicable to the management of staff of Vedanta Resources Ltd. Please communicate your acceptance of the above offer and your date of joining’. iii. The pro-forma acceptance sent with the letter and Statement of terms was drafted in the following terms: ‘I, Shashwat Sharma, accept the offer of employment with Vedanta Resources Limited on the terms and conditions set out in the letter above and in the enclosed Annexures 1 and 2’.[17]In light of the above, the Tribunal finds that the payment to the claimant of a performance bonus was a term of the claimant’s contract of employment. The respondent drafted the wording of the claimant’s acceptance and explicitly included the offer letter and its contents as part of its ‘terms and conditions’.[18]I note the respondent’s claim that para 24 of the Statement of Terms, which states ‘this agreement constitutes the entire and only agreement between the parties relating to your employment by the company’ purports to exclude the offer letter, but the Tribunal finds that it does not. The clause does not refer to the ‘main statement of terms, but to ‘this agreement’ and the Tribunal finds that the agreement explicitly included the offer letter. That this must be right is demonstrated by additional terms extant the bonus which only appear in the offer letter, and not the main statement of terms – such as the duration of the contract of employment being only three years.[19]The Tribunal finds the offer letter and its terms form an integral part of the agreement between the parties, and the claimant is therefore legally entitled to a bonus payment as part of his remuneration package from the respondent.[20]The question then becomes – how much is the claimant entitled to receive? It is not in dispute that the claimant did in fact receive a bonus payment of £60k on 12th September 2024. The claimant states that he understood that he had met the criteria for a payment of £150k. He relied upon the wording of paragraph one of the offer letter, and the content of conversations that he had with Ms Srivastara on 30th March before he entered into the contract of employment. He states that he sought clarity from Ms Srivastara as to what would need to happen in order for him to receive the performance bonus outlined in the offer letter. He recounts being told that he would have to agree deliverables with his manager over the course of the year, and that if these were met then he would receive the performance bonus outlined in his offer letter.[21]The claimant accepts that he received the slide at pg 106 in the attached to the email which lists seven ‘Bonus Scheme Parameters’. The ‘Individual Performance’ parameter consists of 30% of the performance parameters to be multiplied by the APA rating to determine the final bonus amount. The APA ratings range from 100% at A, to 0 at D.[22]However, the claimant also states that it was this document which prompted the telephone conversation with Ms Srivastara, and the reason he sought clarity as to what he had to do in order to receive the bonus as outlined in his offer letter. It is clear from the emails the claimant sent, chasing his bonus payment in April, July and September 2024, that he believed all he had to do was achieve the deliverables and targets agreed with his manager to achieve the full bonus. It is notable that the respondent did not seek to contradict his assertions in response to these chasers.[23]The respondent relies on bonus slide, and indeed a ‘Bonus Policy and Scheme’ found at pages 107 to 118 of the bundle. The claimant alleges, and it is not disputed by the respondent, that this document was not provided to him before, or during the course of his employment, and was only disclosed to his solicitors on 23/05/25, and seen by him for the first time on 2/06/25, some three days ago.[24]The claimant states that he met all his deliverable and targets as agreed with his manager, and that his manager awarded him the ‘A’ grade rating – the highest possible, as confirmed by his former manager in emails dated 07/11/24. Mr Agarwal, in his witness statement, states that he does not remember the claimant being awarded an A rating in his performance meetings, although he accepts that this is possible as he was not present for all of it due to other commitments. He then goes on to suggest that the London office does not operate a formal A/B/C performance rating system so any A grade performance would have been an informal colloquialism. Mr Kumar in contrast appears to accept that the claimant achieved an A rating.[25]Mr Kumar makes much in his evidence of a credit report dated January 2024 which downgrades the respondents credit rating, with a number of reasons as to why such an action was taken. He claims that this demonstrates that the company was not performing well in the 2023-34 financial year, and that performance would have been factored into any calculation of bonus payments to be awarded that year. The claimant in his evidence stated that by the end of the financial year, the respondent’s share price had risen significantly, partly due to the success of the projects he was involved in, including raising a significant amount of additional finance for the company. The credit rating, he argues, demonstrates only a snapshot in time and is not representative of the respondent’s performance over the year.[26]It is difficult to apply much weight to the contents of the respondent’s witnesses given their absence from the hearing and the claimant’s consequent inability to cross examine them. I also note the lack of any evidence from Ms Srivastara, with whom important conversations regarding the nature of the bonus took place, and on whose assurances the claimant relied upon when entering into employment with the respondent.[27]The claimant, and indeed the Tribunal, has been left somewhat in the dark as to how the claimant’s awarded bonus of £60k was calculated. There is no breakdown within the respondent’s evidence, no identification of which parameters outlined in the ‘bonus scheme’ were considered, or the percentage he was awarded under them. There is no evidence from the decision makers as to how and why they calculated the bonus in the way they did, or how much reliance, if any was placed on the downgraded credit rating of January 2024. The decision maker with regard to awarding bonuses has not been identified. If, as the respondent alleges, the bonus payment is discretionary, the claimant and the tribunal have been left entirely in the dark as how that discretion has been applied, and/or the criteria that were taken into account.
Findings
[28]The tribunal finds that the claimant had, under the terms of his employment with the respondent, a legal entitlement to receive a bonus of £150k, dependent solely upon his personal performance in meeting the deliverables and targets set by his manager during the financial year 2023-2024. The reasons for this are: i. That is what is explicitly stated in numbered paragraph 1 of his offer letter, which forms an integral part of his contract of employment. ii. The agreement refers to a ‘performance bonus’, then outlines what that means by reference to ‘achievement of agreed deliverable/KPIs applicable from time to time’ which were to be agreed with his manager. iii. The phrase ‘from time to time’ does not refer to the discretionary element of apportioning a bonus payment, but to the agreement of deliverables that may change during the course of the year. iv. What is written in the agreement mirrors what he was explicitly told by the Head of HR when he sought clarity and confirmation on this point before he entered into the agreement. v. There is no mention within the agreement, or the conversations around it, that there were other parameters that would be considered. vi. The bonus slide does not form part of the terms and conditions of the agreement with the claimant. Where other parameters are mentioned within the ‘Bonus slide’, these were explicitly overridden by the terms of the agreement and the oral assurances that he was given by the head of HR. vii. There is no clarity or consistency in the evidence provided by the respondent as to any other method by which the claimant’s performance bonus could have been calculated. There is no formal ranking of him in line with the Bonus Policy (i.e. Mr Kumar suggests that he is an ‘M2 employee – para 17 W/S) but he gives no evidence as to how or when that ranking came about or what criteria were used – or how that in reality fed into the calculation of his bonus. The witnesses cannot agree on whether the claimant was or should have been awarded an A grade for his performance, or if indeed those grades were even used in assessing the claimant’s performance, or if they were, how that fed into the calculation of his bonus. viii. The claimant was not provided with a copy of the Bonus Policy and Scheme prior to entering into the contract of employment, nor at any point during his employment. He did not become aware of its content until it was disclosed by the respondent a matter of days before the final hearing. There is no evidence before the Tribunal that he was subject to it, or that it was used to calculate the portion of the bonus he received. The respondent has not sought to provide a calculation, or justification under the terms of the scheme as to why the claimant’s bonus should remain at £60k, rather than the £150k he expected after meeting his targets/deliverables. ix. The Tribunal is not satisfied that the respondent has demonstrated that the company was in any financial difficulties over the course of the relevant period. It is odd that a snapshot credit rating has been provided three months before the claimant would have become eligible for his bonus payment. The respondent must have company records or accounts to give a true picture of their status at the time the bonus payment crystalised in March 2024, and a one-off credit rating at a different moment in time is entirely unsatisfactory to demonstrate the respondent’s performance over the course of the entire year, or its financial health at the time the bonus was awarded. Moreover, even if this evidence were taken at its highest, there is no evidence before the tribunal of how it fed into the calculation of the claimant’s bonus payment.[29]In all the circumstances, the claimant had a legal entitlement to a bonus which, if he met all the criteria outlined to him at the time he entered into the agreement with the respondent, and indeed all the criteria that were given to him up and until the moment he queried the bonus he received in September 2024, would be the ‘target remuneration’ for the year consisting of his base pay and the £150k performance bonus. The respondent’s only discretion in awarding the bonus, as per the agreed terms, was if the claimant failed to meet his targets and deliverables as agreed with his manager. In the light of the lack of evidence that he failed to meet the targets and deliverable outlined to him throughout the course of the year, and indeed the confirmation from his line manager that he did in fact meet them, and acceptance, albeit reluctant, from the respondent that he was given a Grade A rating – it is difficult to see how the respondent can maintain that the awarding of only 40% of the ‘target bonus’ was a reasonable exercise of their discretion under the agreement.[30]In lieu of any explanation, calculation or demonstration as to how that figure was calculated, or an evidenced justification, this Tribunal cannot find that there was a reasonable or proportionate derivation from the £150k target outlined in the claimant’s agreement terms. The only conclusion the Tribunal can therefore draw is that the claimant met all the qualifying criteria laid out in his terms and conditions for the target bonus of £150k, and the reduction of £90k therefore constituted an unlawful deduction in the remuneration he was legally entitled to receive.[31]If the Tribunal is wrong about the reduction in bonus constituting an unlawful reduction in wages, for the same reasons outlined above, the bonus reduction from the ‘remuneration target’ was a breach of contract, albeit remuneration for the same would be capped at £25k. Approved by: