P Chandrashekarappa v Wipro Ltd

For an unlawful deduction claim, a bonus is wages properly payable once the worker has a legal entitlement to it. The entitlement may arise before the amount is calculable, where only later quantification remains. The employer must assess entitlement by reference to the bonus terms communicated and the discretion conferred under them. Once that discretion has been exercised, the employer cannot retrospectively add approval requirements or impose a cap that was not part of those terms. A later decision-maker’s subjective view of the scope of his authority is not determinative.

The Employment Tribunal dismissed a claim that Wipro had unlawfully deducted part of a discretionary kitty bonus. The bonus had been announced in March 2020 as up to 1% of new-logo invoicing, subject to Sector Lead approval. After the claimant secured the John Lewis Partnership deal, the Sector Lead approved his manager’s proposal that he receive the full 1%. Wipro later introduced a further approval requirement and a $150,000 cap, paying that capped amount.

The Tribunal held that no legal entitlement arose until the capped bonus was formally declared in December 2020. The claimant appealed, arguing that the Tribunal had wrongly treated later subjective views and conditions as determinative.

1. Appeal allowed. The Tribunal had erred in treating the Sector Lead’s later view that higher approval was required as determinative of the claimant’s entitlement.
2. Under section 13(3) of the Employment Rights Act 1996, wages are properly payable where the worker has a legal entitlement to them. That entitlement need not be conventional contractual entitlement. A bonus entitlement may be established before the amount is finally calculable, provided only quantification remains.
3. The Tribunal should have analysed the March 2020 bonus parameters and the Sector Lead’s approval on 1 July 2020. The relevant question was whether the discretion had been exercised within those parameters, not what the Sector Lead later subjectively believed his authority to be.
4. Once the Sector Lead accepted the recommendation that the claimant receive 1% of the first-year revenues from the deal, the claimant acquired an entitlement to that sum, payable when the revenues became known. The employer could not subsequently add a higher-level approval requirement or introduce a $150,000 cap which had not been communicated as part of the scheme.
5. The Tribunal’s reliance on Farrell Matthews & Weir v Hansen [2005] IRLR 160 was misplaced. That case did not determine the distinct question whether an earlier entitlement to a future, later-quantifiable sum had already arisen.
6. There were no further factual issues requiring remittal. Applying Jafri v Lincoln College [2014] IRLR 544, the only correct outcome was substituted: the claimant was entitled to 1% of the first-year revenues from the deal, less the sterling equivalent of the $150,000 already paid.

• Employment Tribunal: The Reading Employment Tribunal dismissed the claimant’s unlawful deduction claim in a Reserved Judgment sent on 24 June 2024.
• Employment Appeal Tribunal: Permission to proceed was granted at sift on 4 December 2024. The appeal was allowed and the EAT substituted the correct finding.