Moving the Goalposts: Chandrashekarappa v Wipro and the Crystallisation of Discretionary Bonus Entitlements

There is an old question in bonus litigation: at what moment does a discretionary payment stop being discretionary? Courts have circled it for decades without quite landing. A judgment handed down yesterday by Bruce Carr KC in the Employment Appeal Tribunal gives the clearest answer yet — and it is more protective of employees than most practitioners will have expected.

The answer, in short, is this: the entitlement crystallises when the employer's designated decision-maker exercises the disclosed discretion in the employee's favour, in accordance with the terms as communicated. After that point, the employer cannot revisit the amount, add a new approval layer, or impose a cap that was never part of the announced scheme. Any attempt to do so is an unlawful deduction from wages.

The Facts

Mr Chandrashekarappa worked for Wipro in a sales role. In March 2020, at a Variable Pay Plan presentation, staff were told of a new “kitty bonus”: up to 1% of revenues from “new logo invoicing against first 12 months”, subject to Sector Lead approval. The footnote was terse. The oral briefing was blunter — the Claimant's line manager told him, before the presentation, that winning the John Lewis Partnership (“JLP”) deal would make him “one of the highest-paid sales people globally.”

He won the JLP deal. On 1 July 2020, his line manager wrote to the Sector Lead, Kiran Desai, proposing the full 1% bonus with a copy of the scheme footnote. Mr Desai replied immediately: “I am ok. Go ahead.” The line manager forwarded the exchange to HR with the instruction to “inform the relevant folks.”

Two weeks later, things began to shift. Mr Desai indicated he would only send a congratulatory email “when the gods approve.” A senior HR figure then circulated an internal note — seen by neither the Claimant nor his line manager — identifying a $150,000 cap and a requirement for sign-off from more senior management. These conditions had never appeared in any document communicated to staff. The line manager himself pushed back, writing that the cap “should not have been communicated upfront while policy was getting communicated.” He proposed a cap of $300,000. That too was rejected. In December 2020, Wipro formally communicated a capped bonus of $150,000. The Claimant received it in February 2021.

The first-year JLP revenues, once calculated, were over £51 million. One per cent of that came to £516,082. The gap between what was paid and what was claimed was roughly £366,000 net of the sterling equivalent of $150,000.

The ET Decision: Wrong Turn at Paragraph 119

The Reading Employment Tribunal dismissed the claim. Its key finding was that no legal entitlement had crystallised on 1 July 2020, because Mr Desai himself had subsequently taken the view that approval from “the gods” was required. The ET characterised this as a Farrell Matthews & Weir v Hansen [2005] IRLR 160 scenario — an ad hoc bonus not yet declared — and concluded that the obligation to pay arose only on 15 December 2020, at the point of formal communication. Since that communication included the cap, there was nothing more that was “properly payable.”

The EAT identified the error immediately. The ET had used Mr Desai’s subjective view of his own authority as determinative of the objective question of what the Claimant was owed. That was the wrong question. Mr Desai’s later hesitation was irrelevant; what mattered was what the scheme had communicated and whether the approval it required had been given. Both questions had the same answer: yes.

The Legal Analysis: Three Grounds, One Point

The Claimant advanced three grounds of appeal. Bruce Carr KC treated them as substantially overlapping and disposed of them together around a single organising principle.

The starting point is New Century Cleaning Co Ltd v Church [2000] IRLR 27, in which the Court of Appeal confirmed (Beldam LJ) that wages are “properly payable” for the purposes of s.13(3) ERA 1996 where “the employer is rendered liable to pay, either under the contract of employment or in some other way.” The definition of “wages” in s.27(1)(a) is deliberately broad: it includes any “fee, bonus, commission … or other emolument referable to [the worker’s] employment, whether payable under his contract or otherwise.” Non-contractual bonuses are squarely within scope once the legal obligation to pay them arises.

Farrell Matthews & Weir v Hansen established that once an employer announces a bonus on stated terms and the employee acquires a legal entitlement, the bonus is wages properly payable under s.13(3). Nelson J: “Once … an employer tells an employee that he is going to receive bonus payments on certain terms, he is, or ought to be obliged to pay that bonus in accordance with those terms until the terms are altered and notice of the alteration is given.”

The ET had treated Farrell Matthews as meaning that entitlement could only arise at the moment of formal declaration — i.e. on 15 December 2020 when the capped figure was announced. Bruce Carr KC rejected this as a misapplication. Farrell Matthews was a case about looking forward from a declared bonus: would the employer’s subsequent non-payment of an already-declared entitlement constitute an unlawful deduction? The issue in Chandrashekarappa was different: looking backwards from the December 2020 declaration to ask whether an earlier event — Mr Desai’s approval on 1 July 2020 — had already given rise to an entitlement that the December announcement was not entitled to cut down.

The EAT’s analysis proceeded in three steps. First: what were the terms under which the kitty bonus would be earned, as communicated to staff in March 2020? Answer — up to 1% of relevant revenues, subject to Sector Lead approval. Second: had those terms been satisfied? Answer — yes. The JLP deal was signed; the Sector Lead had approved. Third: was there anything in the communicated scheme that reserved a further discretion to impose a cap or require additional approvals? Answer — no. None of those conditions appeared in the March 2020 footnote. None was communicated to the Claimant or his line manager before the approval was given. The first mention of a cap or higher-level sign-off came from an internal HR email on 15 July 2020 — a document the Claimant never saw.

Once those steps were taken, the conclusion followed directly: “Once Mr Desai had accepted the proposal … it was not open to the Respondent to add further conditionality to that entitlement whether it be by seeking approval at a higher level within the business or by belatedly applying a cap.”

The EAT substituted a finding of unlawful deduction rather than remitting. On the facts as found, there was only one correct answer. The Claimant was entitled to 1% of first-year JLP revenues less the sterling equivalent of $150,000 already paid.

What the Judgment Does Not Decide

Two limitations are worth noting. First, the EAT did not decide that discretionary bonuses are always contractually enforceable, or that the s.13 jurisdiction extends to cases where the bonus has never been communicated as earned. The crystallisation principle operates after the designated discretion has been exercised in accordance with the announced terms — not before. An employer who reserves a genuine, unfettered discretion that has never been exercised has not made an unlawful deduction by declining to pay anything at all.

Second, the jurisdiction question remains live in cases where the bonus is not quantifiable at the date of the alleged deduction. The EAT followed the Court of Appeal’s reasoning that a s.23 claim is not defeated merely because the sum cannot yet be calculated, provided that the entitlement (the right to 1% of whatever the revenues turned out to be) had already been established. Whether that analysis extends to genuinely speculative or performance-conditional entitlements is a question for another case.

Practical Implications

Three points for practitioners.

The approval architecture matters. The case turns on the gap between the terms as communicated to staff and the terms as understood internally by management. Where bonus scheme documentation is maintained in different versions — one for staff, one for HR — the employer is exposed if the internal version imposes conditions not reflected in the staff-facing document. Employers should audit their bonus scheme documentation for exactly this kind of asymmetry.

Post-approval conduct is not a discretion reset. Once a designated approver has exercised the communicated discretion in an employee’s favour, that exercise cannot be revisited by importing conditions that did not form part of the original scheme. The approver’s subsequent change of mind — or the intervention of a more senior manager — is legally irrelevant. This is precisely the ‘moving the goalposts’ vice the EAT condemned.

The s.13 route has real advantages over breach of contract. The employment tribunal’s breach of contract jurisdiction is capped at £25,000. The s.13 route for unlawful deductions from wages has no such cap. For the bonus claims most likely to give rise to this kind of dispute — significant sales commissions, long-service arrangements, scheme-based entitlements — the difference in recoverable amounts is substantial. Chandrashekarappa confirms that s.13 is the right vehicle once crystallisation can be established.

The judgment arrived the day after Daniel Barnett summarised it for his mailing list. That is unusually fast. It probably reflects the practical importance of the point: employers in financial services, sales-driven industries, and tech — sectors where kitty arrangements, discretionary pools, and performance bonuses proliferate — will want to review their position carefully. The employee who secured a deal worth £51 million in first-year revenues, whose manager recommended the full 1%, whose Sector Lead said “go ahead”, and who then received a fraction of what he was told he would get, has now waited six years for vindication. He should not have had to wait at all.

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