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Hello ma’am!
I have three specific doubts relating to this below mentioned paragraph: One, why does any approval from BOD to department head needs be communicated in WRITING rather than a simple mail?
Two, could you give examples of any “written policies” that companies have for deceasing discretionary bonus?
Three, what makes a production director more independent than a production supervisor?
“The discretionary bonus should be determined by a responsible official, such as the production director and should be formulated based on a written policy. If significant in value, the bonus should be formally agreed by the board of directors.
The bonus should be communicated in writing to the payroll department.”1. “Writing” does not mean in manuscript/hand writing as opposed to typed. It means written/in writing as opposed to spoken/orally.
2. I don’t know what you mean – discretionary means that there is choice or judgment. If a sales manager is entitled to a bonus for achieving a sales target, he must be paid it if he achieves the target. The directors cannot exercise any discretion and not pay him. A bonus to a workforce might be discretionary depending on the overall performance of the company as measured by a number of factors (which would be documented) and it is for the directors to decide to what extent performance has been achieved. It might be that they will still pay a bonus (at their discretion) even though performance has fallen short in some area.
3. It’s about accountability and responsibility – directors have duties and responsibilities in law. As the answer indicates, if talking about a significant bonus, the board collectively would agree the bonus.
Ma’am those formulated written policies will apply as much to the production supervisor as they will to the production director, so then why can’t just supervisors go ahead with the discretionary bonus?
If they(supervisor) pay any extra bonus to their friends/family members then they will be questioned by their seniors, as to why they breeched the written policies with regards to bonus.
Any “company policy” – whether “accounting policy” or “recruitment policy” or “remuneration policy” – must come from the board of directors (otherwise it’s not a company policy).
Per the scenario there is no mention of a written policy. Whether the production supervisor or the production director “formulates” how the bonus is to be determined it still needs a written policy (to be used as a basis). With a written policy in place, the production director will be sufficiently senior that he could formulate a policy that does not need to revert to the board for further approval, but the supervisor does not have that level of authority. OK – so maybe the supervisor drafts the policy for the director, but you’re just complicating the issue.
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