Employer cannot change bonus rules after approval: lessons from Chandrashekarappa v Wipro

Overview – why this case matters

Bonus schemes are a common feature of incentive driven roles, but disputes often arise when employers try to adjust or reinterpret the rules when existing schemes are in place. The Employment Appeal Tribunal’s decision in Chandrashekarappa v Wipro is an important reminder that once discretion has been exercised in line with a published scheme, an employer cannot later “move the goalposts”. This case offers valuable guidance for both employers designing bonus structures and employees seeking clarity over their entitlements.

Background

Mr Chandrashekarappa (the Claimant/C) worked in a sales role at Wipro and attended a presentation where the company announced a discretionary “kitty bonus” of up to 1% of revenue from new business. Staff were told that the only condition was approval from the relevant sector lead. When the C secured a major contract with the John Lewis Partnership, the sector lead approved a proposal for him to receive the full 1% bonus. Based on first‑year revenues, this would have exceeded £500,000.

The dispute and change in bonus terms

However, several weeks later a different senior manager introduced new requirements: additional sign‑off from more senior executives and a cap of £110,000 In December 2020, Wipro formally communicated that the C’s bonus would be capped at that level. The Claimant argued that he was entitled to the full 1% and that the retrospective cap amounted to an unlawful deduction from wages.

Tribunal decision and appeal outcome

The Employment Tribunal initially rejected his claim, finding that no entitlement arose until the formal December announcement. But the Employment Appeal Tribunal overturned that decision. It held that the Tribunal had wrongly treated the sector lead’s later change of mind as decisive. The correct approach was to look at the scheme as communicated to staff. Once the sector lead exercised discretion to approve the full 1%, the C’s entitlement crystallised at that point. Wipro could not subsequently impose new approval layers or subsequently introduce a cap that had never formed part of the original bonus scheme.

Key lessons for employers and employees

This judgment highlights the importance of clarity, consistency, and fairness in bonus arrangements. Employers should ensure that discretionary schemes are carefully drafted and applied in line with the terms communicated to staff. Attempts to retrospectively alter criteria or limit awards carry significant legal risk of a breach of contract or unlawful deduction of wages claims. Employees, meanwhile, should be aware that once discretion is exercised in their favour, their entitlement may become enforceable.

How we can help

We advise employers in connection with designing and operating bonus schemes, preventing pay‑related disputes, and defending tribunal claims. We also act for employees seeking to challenge withheld or reduced bonus payments. If you need guidance on how this decision may affect your organisation or support with a current workplace issue, our team is ready to help.