Contractual versus discretionary entitlement
Wages / incentives
Are Incentive Payments “Wages” Under the Labour Codes?
A practical review of when performance-linked incentives may or may not form part of statutory wages.
2026-07-17Original publication date
Employer focusedPractical compliance guidance
Current check requiredVerify official position before action
01
Overview
The legal treatment of an incentive depends on substance, documentation and the rights created—not only the label used in payroll.
Employers should review whether an incentive is contractual, discretionary, recurring or revocable and how the scheme is documented in appointment terms and HR policies.
The treatment can affect wage-linked statutory benefits and contributions, so compensation design should be reviewed before payroll changes are implemented.
02
Key review points
What employers should examine.
Scheme wording and employer right to amend
Frequency and regularity of payment
Wage-definition exclusions and add-back rules
Impact on statutory benefits and contributions
Employment contract and policy drafting
Compliance note
Translate guidance into an establishment-specific review.
Administrative FAQs can be useful guidance but should not replace the statutory text or binding judicial interpretation.
Check the current statutory text, notifications, rules and official guidance before implementation.