By: Stephanie McDonald and Baljinder (Bal) Singh Tiwana
Bonuses often cause confusion. Employers may call them “a token of appreciation” or “a reward for your efforts.” In reality, most employees work hard to hit targets that trigger a bonus.
Bonuses are more than gestures. They motivate performance and reward results. When tied to measurable goals, a bonus is earned—not gifted.
A gift is voluntary. A bonus tied to performance is compensation. The line between the two isn’t always clear, and disputes often arise when employees are denied earned bonuses.
This guide explains:
- When a bonus counts as wages
- When a bonus is a gift
- Bonus rights during the notice period (ESA and common law)
- Employer tactics to avoid payment
- What makes bonus language enforceable
- When bonuses aren’t owed
1. When a Bonus Is a Wage
Non-Discretionary Bonus
Under section 1(1) of Ontario’s Employment Standards Act (ESA), “wages” include non-discretionary bonuses. These are bonuses are tied to performance measures—like productivity, sales, or hours worked—and promised in your employment contract (written, verbal, express, or implied).
You’ve earned the bonus if:
- It’s non-discretionary (contractually required), and
- It’s linked to measurable results.
Once you meet the conditions, the employer must pay it.
Discretionary Bonus (Gift)
The ESA excludes discretionary bonuses from “wages.”
These are completely voluntary and not linked to performance.
Examples:
- Year-end goodwill payments
- Holiday gifts
- Random rewards
These are gifts, not wages. The employer can pay or withhold them at will.
2. Bonus Entitlement During the Notice Period
Entitlement Under the ESA
Under section 60 of the ESA, employers can’t cut your wage rate or change your terms or conditions of employment, during the notice period after you’ve received notice of termination.
When Your likely Not Entitled to it
If your bonus is non-discretionary and you meet the performance targets during notice period, it’s likely owed to you.
If you don’t meet the conditions, or if the bonus is discretionary, it’s likely not owed.
Entitlement Under Common Law
Under common law, employees are entitled to everything they would have earned during the reasonable notice period—including bonuses—unless the contract clearly and lawfully removes that right.
If the bonus is a regular part of pay, Courts often treat it as compensation. Vague or unfair clauses that try to deny payment are less likely to be upheld by the Court.
3. How Employers Avoid Paying Bonuses
Some employers try to avoid paying bonuses using tactics like:
- Contract wording: Calling the bonus “discretionary” or requiring “active employment” on payout date
- Termination clauses: Denying bonuses after termination or during the notice period
- Timing games: Ending employment before the bonus becomes payable
- Unrealistic targets: Setting goals too high to reach
Courts often reject these tactics. If the bonus is earned or part of normal pay, it’s usually treated as wages, regardless of what the contract says.
4. Enforceable Bonus Language
Enforceable bonus language is wording that lawfully limits or excludes bonus entitlement after termination or during notice period.
To hold up in court, it must be:
- Clear and specific—no vague “active employment” terms
- ESA-compliant—can’t take away minimum statutory rights
- Consistent—defines when a bonus is earned or lost
Ambiguous or illegal clauses fail. Courts interpret unclear contracts in favour of employees, especially when bonuses form part of regular pay.
5. When You’re Not Entitled to a Bonus
You likely won’t receive a bonus if:
- It’s discretionary and clearly described as such
- It’s not considered wages under the ESA’s definition
- You didn’t meet performance conditions before termination
Conclusion
Bonuses matter. They’re often a key part of your pay.
- Non-discretionary bonuses tied to performance are earned wages. Employers must pay them once earned.
- Discretionary bonuses are gifts—voluntary and not legally required.
Employers use contract language to limit obligations, but Ontario Courts may strike down vague or unfair clauses. Whether a bonus is enforceable depends entirely on the wording and the law.
If you’ve been denied a bonus, review your employment contract or bonus plan. Legal advice can help you determine if the payment was rightfully yours.
Workplace Sage Legal can help you review your agreement and potentially recover unpaid or disputed bonuses.
Knowing your rights gives you power—and helps you move forward with confidence. Book a consultation today.
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While reasonable efforts have been made to ensure the accuracy of the content provided, it does not constitute legal advice. Prior to relying on any aspect of this article, you should consult with a suitably qualified legal professional promptly in your relevant jurisdiction, to obtain advice tailored to your individual circumstances
Nothing in this article should be interpreted as forming a solicitor-client relationship or construed as a solicitation for legal services.
