This decision is significant as it is unusual for such a case to go as far as the High Court and not to be settled out of court. Previously, where a contract stated that the payment of a bonus was discretionary, it was thought that the exercise of such discretion was free from any constraints. But this case appears to suggest the exercise of discretion is subject to the test of perversity and irrationality and employers will have to ensure that they can fully justify the reasoning behind their decision. The case is a significant blow to employers' flexibility in awarding bonuses. The word ''discret-ionary'' may no longer be enough to allow the employer to decide whether or not a bonus payment will be made.
Employers face a difficult choice.
They can either insert detailed bonus provisions into the contract, leaving them with very little freedom to decide whether to make payment of a bonus or not when the targets are met, or the contract can be kept vague, leaving as much discretion as possible. However, where the bonus provision is vague, employers run the risk of facing legal action if they do not observe strict procedures when awarding bonuses. Employers may now have to be as rigorous about making decisions on the payment of bonuses as they are on making payments for redundancies and dismissals.