Why your bonus could be taken into account in calculating your ex-spouse's maintenance
In cases involving a marriage breakdown, family lawyers are frequently required to give consideration to whether one party to the marriage would be entitled to receive ongoing maintenance payments from the other, if there is a disparity between the parties' respective incomes.
Each case will be dependent on its own particular facts but the court will be required to take in to account, amongst other matters, the reasonable income and outgoings of the husband and wife, before concluding whether spousal maintenance should be paid. In establishing a maintenance liability, it is open to argument as to the extent of what should be taken in to account. For example, should the maintenance calculation be carried out on the basis of the parties' salaries only, or should discretionary bonuses also be taken in to account?
This issue was addressed in an English appeal case by the name of B v B, wherein Roberts J, the judge hearing the case, allowed in part a husband's appeal of a financial remedies order requiring him to pay his estranged wife ongoing maintenance of £78,000 every year as long as they both were alive.
The original order made by the lower court, before the case was appealed, was based on the husband having earned a net annual income of £170,000 from his employment in Dubai.
The appeal was allowed on the basis that the judge hearing the original case failed to take in to account that the husband's income figure included a local housing and car allowance of approximately £40,000 per year, which was largely absorbed by the cost of him renting a property and running a car as an essential requirement of his employment and that he received an annual discretionary bonus of £37,000.
On appeal, Roberts J held that the husband had an annual disposable income of £127,000, excluding the house and car allowance, which was made up of a basic net salary of £90,000, plus the discretionary bonus.
The judge awarded the wife annual maintenance of £42,000 as well as a sum equivalent to 25% of the husband's annual discretionary bonus.
This case is significant in light of the judge's two-stage approach in deciding the award of maintenance; the first, an amount ordered from the husband's basic salary and the second, the top-up element expressed as a percentage of the husband's bonus.
In doing so, the judge followed the approach in an earlier case of H v W (2013) EWHC in which the husband's bonus, which accounted for 50% of his total income, as compared to 21% in the B v B case, resulted in the same two-stage approach taken by the court, rather than the conventional award.
The judge in this case did, however, indicate that there is no absolute requirement to adopt this two-stage approach in every case where the payer receives a bonus in addition to their income.
Therefore in light of the judgment in this matter, it would seem that it is open to the parties to argue that in considering an award of maintenance, a discretionary bonus will not necessarily be excluded from income calculations and could well be factored into a maintenance award in the same way, by way of a percentage calculation.
It is important to remember, however, that each case will be dependent on its own facts, and it will be at the discretion of any judge hearing such an application as to whether to apply the same approach.
- If you require advice in respect of any issue arising from a marriage breakdown, you can contact our family law department by email on email@example.com or ring the office on 028 91811538 for confidential advice or assistance