Neither an annual increase nor a thirteenth cheque is automatic in law. Both may become obligations anyway — through the contract, through a bargaining council or sectoral determination, or simply through having done it every year without saying otherwise.
That last route is the one small employers walk into by accident.
The thirteenth cheque
There is no general legal entitlement to a December bonus. But if it is in the employment contract, it is contractual. If a bargaining council agreement provides for it, it applies. And if you have paid one every year for several years without ever describing it as discretionary, an employee has a reasonable argument that it has become an established practice.
The fix is language, applied before the first payment rather than after the fourth. If a bonus is discretionary, say so in writing each time — what it depends on, and that it does not create an expectation of future payments. If it is guaranteed, say that instead, and budget for it as the thirteenth month of payroll it is.
What causes damage is ambiguity. An employer who quietly stops something staff had come to count on, in a bad year, without ever having set expectations, gets the worst of both: no goodwill from the years it was paid, and a grievance in the year it was not.
Performance bonuses
If a bonus depends on performance, the measure has to be knowable in advance and assessable afterwards. "If we have a good year" is not a measure; it is a hope, and it produces an argument every December about whether the year was good.
Set out what is being measured, over what period, and what payment follows from what result. Then apply it consistently — a scheme applied to one person and not another, without an articulable reason, is a fairness problem waiting to surface.
Annual increases
Also not automatic, unless the contract or a council agreement provides for it. But inflation is not optional for your staff, and a salary held flat for three years is a real cut that people eventually respond to by leaving.
Have a date. Doing increases on a fixed annual cycle turns an awkward individual negotiation into a process, and it lets you plan the cost. Tell people what the date is, so they stop wondering and stop asking at random moments.
Be careful with minimums. Where a national minimum wage or a sectoral determination applies, your lowest-paid staff have a floor that moves whether or not you planned an increase, and it moves for them regardless of what the business could afford that year.
Non-cash alternatives
In a year when the money genuinely is not there, say so plainly rather than going quiet. Staff generally handle bad news better than silence.
Flexibility, time off, training, a title that reflects what somebody actually does — these are real and cost little. They are not a substitute for pay indefinitely, and treating them as one is transparent to everybody. But for a single difficult year, honestly explained, they carry more goodwill than most employers expect.
General guidance, not legal advice. Minimum wage, sectoral determinations and bargaining council agreements change; confirm what applies to your sector.