Lloyds Bank RTO policy: is it legal to withhold bonuses?

The ongoing deliberation around return to office (RTO) mandates continues as more and more businesses enforce these policies, much to the dismay of employees.

Lloyds Bank was one of many firms introducing its own last year, but came under fire after announcing it would withhold bonuses from workers who didn’t comply.

As companies continue to push for more in-office attendance, it begs the question of whether these kinds of measures are legally sound, or if they could expose employers to lawsuits and reputational risks.

Lloyds Bank’s stance and its potential impact

Lloyds Bank announced that it would tie in-office attendance with performance-based bonuses this year. The banking giant currently uses a hybrid working model, in which staff are required to come into the office at least twice a week.

Employees are expected to receive their bonuses for the 2024 financial year this month, but for senior bankers, office attendance will also be taken into account.

Lloyds enforced its RTO policy in 2023 after concerns over productivity. However, its employee engagement survey for that year revealed a 66% decline in satisfaction, down from 78% the previous year. Unsurprisingly, the changes in flexible work arrangements were blamed for this decrease.

Now, the company’s decision to withhold bonuses for those who don’t come into the office not only risks productivity and talent retention but also raises legal questions.

One potential problem Lloyds could face is whether this decision will violate existing employment contracts, especially if bonuses were previously awarded based solely on performance. If attendance wasn’t originally a condition, employees might argue that the bank is shifting the goalposts unfairly.

Moreover, there’s also the risk of discrimination claims. If certain groups – such as employees with disabilities, caregivers or those with long commutes – are disproportionately affected, the policy could be seen as indirect discrimination under the UK’s Equality Act 2010.

What are your rights?

RTO mandates are legal, but only if the original employment contract states the role as office-based, and if no long-term change was agreed upon. Bonuses based on office attendance are also legal in practice, but pose the risk of discrimination, as previously mentioned. Additionally, if an employee was previously promised a bonus based only on performance, adding an office attendance requirement after the fact could be challenged as unfair or even a breach of contract.

In terms of flexible working arrangements, this is something employees have the right to request under the Employment Relations (Flexible Working Act) from the first day of employment, and can make two requests every 12 months. However, this isn’t guaranteed to go through, as employers can refuse the request.

Finally, if an RTO policy disproportionately impacts certain groups (e.g. employees with disabilities or caregivers), employees have legal rights to make a discrimination claim. A constructive dismissal claim can also be made if the policy significantly changes the terms of employment and makes it difficult for the employee to continue working.

Alternative approaches to RTO

While RTO mandates and attendance-based bonuses are legal, they can hurt employee engagement and morale, as well as risk high staff turnover.

For example, software company Dell sparked controversy last year when it was reported that hybrid and remote workers were less likely to receive a promotion. The company also ordered staff back to the office full-time at the beginning of the month, specifically for remote workers who live within an hour of an office space.

The rise in RTO policies hasn’t resonated well with employees. From increased resignations to staff silently rebelling by working from home in secret, this latest workplace trend has faced a lot of backlash. Workers from the Office of National Statistics (ONS) even voted to go on strike in October, following a year-long dispute over office attendance.

So, what should businesses do if they want more in-office attendance, but don’t want to face backlash or resistance from RTO mandates?

One of the best alternatives is hybrid working, in which employees can split their time between working remotely and working on-site. According to research by ONS, 28% of workers had hybrid working arrangements in the autumn of 2024. Meanwhile, 47% of employees prefer working hybrid, compared to just 11% who prefer a fully remote working model, which strongly suggests that most workers want a mix of in-person and remote work.

Businesses could also incentivise employees to come to the office without having to resort to a full-blown RTO policy. For example, offering certain perks and benefits such as free meals or social clubs, to help improve organisational culture and employee wellbeing.

All in all, RTO mandates aren’t getting any more favourable with employees, as more companies that once embraced flexible working are hitting the headlines for the wrong reasons. What’s more, while basing bonuses on office attendance isn’t illegal, many businesses could find themselves in hot water for discrimination claims or breaches of contract if these schemes put certain employees at an unfair disadvantage.