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Tougher rules proposed for bonus buy outs

Tougher rules proposed for bonus buy outs

The Bank of England is consulting on new ways to toughen up the remuneration rules that apply when employers ‘buy out’ bonus awards.

It is concerned that when employers buy out bonuses (which is where they compensate a new employee for remuneration the employee has lost by leaving their previous role) this potentially undermines the remuneration rules.

This is because, once their bonus has been bought out, the employee is protected from their award being withheld or clawed back for any malpractice or misconduct which they may have committed in their previous job.

To try to address this issue, under these proposals buy outs would be covered in the contract between the new employer and employee - the new contract would allow the bonus to be withheld or clawed back if the old employer decided that the employee was guilty of risk management failings or misconduct. However, the new employer could apply for a waiver if they felt that the decision was unfair or unreasonable.

Assuming these proposals go ahead we will have to wait and see what mechanisms will be in place to enable new employers to challenge the decisions made by the old employer and to allow information to be shared between them.

The consultation is open until 13 April 2016 and you can find a copy of the consultation document here.