Working Life > Employee > Repeated Business Practise

Company Custom and Practice

Definition, Explanation

Employment contracts, collective agreements and company agreements set out the legal requirements and rights and obligations of employers and employees. But when an employer grants additional payments regularly or other practices are followed several times, a legal entitlement to regular payments etc. can derive from consistent practice. Although custom and practice terms are not stated in the employment contract, they are actually part of the employment contract. Despite any clauses in the contract, requiring a written form (double written form clause) when a contract is changed, employees’ are entitled to grants etc. In such cases consistent practice in a company is referred to as custom and practice.

Company custom and practice comes into being

• as a result of a consistent practice followed by the employer over a lengthy time period, so employees are given the impression that the employer will continue doing so in the future
• if payments are voluntarily and they are not covered by any law or regulation in contracts or agreements
• if an annual payment is given three times in a row in similar forms and is not paid under reserve. Then the term is implied through custom and practice. New employees, no matter how long they have worked for the company, also profit from established custom and practice rights from previous and voluntarily payments. The employer can grant the benefit in question with the proviso that it is only for the current calendar year and with a disclaimer of any commitment for the future

Based on these circumstances, company custom and practice can occur due to

• Christmas bonuses and holiday payments
• paid time off work on Shrove Tuesday or Christmas Eve
• holiday regulations
• flexible working days to compensate for overtime
• break regulations
• sickness notifications
• bonuses, incentives, anniversary gratuities
• food or travelling allowances
• costs for further education or training
• the providing of a parking place
• company pension scheme contributions
• application of certain collective agreements for the benefit of the employees
• and other terms of an employment contract

Works councils have no influence on company custom and practice. However, the works council can ensure that principles of equal treatment are complied with and that entitlement from company custom and practice is not unlawfully withdrawn.

Tips, Checklist

Employers:

• Make sure that
  • you do not grant bonuses in regular intervals, use the same form or pay the same amount, but instead choose different sums for Christmas money each year
  • if you grant a bonus, make sure to declare that is paid without admitting any legal obligation or liability and without any commitment for the future, making them fringe benefits at company’s discretion
• In order to annual customs and practices, you can
  • Urge employees to agree with the termination of established custom and practice terms
  • Give a notice of termination pending a change of contract

Last update: 08/05/2010