A bonus may be described as discretionary. That doesn’t necessarily mean an employer can change the conditions after the employee has met them.

In Chandrashekarappa v Wipro Ltd the Employment Appeal Tribunal considered when a discretionary bonus becomes a legal entitlement, and whether an employer can introduce new conditions after an agreed approval has been given. The employee’s appeal succeeded, with the EAT finding he was entitled to the full bonus calculated under the terms originally communicated, less the amount already paid.

 

Case in brief

Mr Chandrashekarappa worked for Wipro and was involved in securing a contract with John Lewis Partnership (JLP).

In March 2020, Wipro introduced what was described as a “kitty bonus”. The terms presented to the employee were that the bonus could be worth up to 1% of revenue generated from a new client during the first 12 months, subject to approval from the relevant Sector Lead.

The employee’s line manager later recommended that he receive the full 1% relating to the JLP contract. The Sector Lead approved that recommendation on 1 July 2020.

Wipro subsequently took the position that further senior approval was required and applied a cap of US$150,000 to the payment. The employee brought an unlawful deduction from wages claim, arguing that he had become entitled to the full 1% once the agreed approval had been given.

 

What happened?

The March 2020 presentation described the bonus as being worth up to 1% of revenue from new client invoicing during the first 12 months, based on Sector Lead approval.

The presentation also included a statement saying that it provided a broad overview, supported an oral presentation and could be superseded by a final policy document.

Following the JL{ deal, the employee’s line manager recommended that he receive the full 1% bonus. The Sector Lead approved that recommendation on 1 July 2020.

Internal discussions then began about whether additional senior approval was required and whether the payment should be capped. On 15 July 2020, a cap of US$150,000 was introduced into those discussions.

The internal correspondence showed that some managers did not believe this was fair. One senior HR manager said that any cap should have been communicated when the policy was introduced and warned that employees would feel “short changed”.

The employee was eventually paid the capped amount of US$150,000 in February 2021. He later challenged the difference between that payment and the amount he believed represented 1% of the relevant first-year revenue.

 

The original tribunal’s decision

The Employment Tribunal dismissed the employee’s claim.

It concluded that the Sector Lead’s initial approval had not created a legal entitlement because the Sector Lead later indicated that approval from more senior managers was also needed.

The tribunal found that the employee’s entitlement did not crystallise until Wipro formally communicated the capped payment. It therefore concluded that nothing further was “properly payable” and that there had been no unlawful deduction from wages.

 

The Employment Appeal Tribunal’s decision

The Employment Appeal Tribunal reached a different conclusion.

It found that the original tribunal had focused too narrowly on the Sector Lead’s later view that further approval was needed. The correct starting point was what Wipro had communicated about the scheme in March 2020 and what had happened when the Sector Lead approved the full 1% payment on 1 July 2020.

The EAT found that the terms originally communicated had been satisfied. Once the relevant manager had approved the recommendation, the employee had acquired a legal entitlement to a payment calculated as 1% of the John Lewis Partnership first-year revenue.

The exact monetary value could be calculated later, once the revenue figures were known. That did not prevent the underlying entitlement from arising earlier.

The EAT also found that Wipro could not retrospectively introduce further approval requirements or apply a cap that had not formed part of the terms originally communicated.

The judge described this as an attempt to “move the goalposts” after the employee had satisfied the original conditions.

Rather than sending the issue back to the Employment Tribunal, the EAT substituted its own finding. Mr Chandrashekarappa was entitled to 1% of the John Lewis Partnership first-year revenue, less the sterling equivalent of the US$150,000 already paid.

 

What this means for employers

Be clear about the conditions from the start.

A discretionary bonus scheme should set out:

• Who has authority to approve an award
• How the award will be calculated
• Whether a cap applies
• Whether further approvals are required
• When an entitlement becomes payable

The issue for Wipro was not simply that the scheme contained an element of discretion. It was that additional conditions were introduced after the approval described in the original terms had already been given.

 

A discretionary bonus can become a legal entitlement

An employer may retain discretion over whether to award a bonus. Once that discretion has been exercised and the employee has been told they’ll receive a bonus on defined terms, a legal entitlement may arise.

The judgment confirms that a bonus can amount to wages even where the entitlement doesn’t arise through a conventional contractual clause. The key question is whether the employer has become legally obliged to make the payment.

 

Don’t rely on an unpublished approval process

Where a payment requires several levels of approval, that should be stated clearly before employees begin working towards it.

An internal assumption that more senior approval is required may not protect the employer if the scheme communicated to employees identifies a different decision-maker.

 

Align presentations, policies and practice

Wipro’s presentation said that it was not a complete policy document and could be overridden by a final policy. Even so, the EAT examined what had actually been communicated and how the decision had been made.

Employers should ensure that presentations, scheme rules, contracts and internal approval processes all say the same thing. A disclaimer isn’t a reliable substitute for a clear and consistent scheme.

 

What this means for HR and People professionals

For HR professionals advising on bonus arrangements, this case is a reminder to look beyond the word “discretionary”.

The practical questions are:

• What exactly has been communicated to employees?
• Who has been identified as the decision-maker?
• Has that person already exercised their discretion?
• Are any caps or additional approvals clearly documented?
• Is the business trying to change the terms after the employee has met them?

The internal correspondence suggests HR recognised that introducing a cap after the scheme had been communicated could create expectations that weren’t met. Those concerns were later reflected in the issues considered by the EAT.

For HR and People professionals, the case reinforces the importance of reviewing bonus schemes, approval processes and employee communications together. Where those elements don’t align, there’s an increased risk of misunderstanding and dispute.

 

Putting the Learning into Practice

This case is a good reminder that bonus disputes don’t always arise because an employer intended to act unfairly. More often, they arise because the terms of a scheme, the approval process and the communication to employees don’t fully align. Reviewing bonus schemes, approval processes and employee communications before issues arise can help reduce both legal and employee relations risks.

With that in mind, consider the following questions:

• How clearly are the terms of your bonus or incentive schemes communicated before employees begin working towards them?
• Do your bonus schemes clearly set out who has authority to approve awards and whether any additional approvals are required?
• If a manager exercises discretion to approve a payment, could that reasonably be interpreted as creating a legal entitlement?
• Are your bonus schemes, internal approval processes and employee communications aligned, or could they create different expectations?
• If a bonus decision were challenged, would your documentation clearly explain how the decision was reached and demonstrate that the agreed process had been followed?

Read the full judgment: Mr P Chandrashekarappa v Wipro Ltd [2026] EAT 73