Malus and clawback

What they are

Malus and clawback are terms that let an employer cut variable pay after the event.

• Malus reduces or cancels an award before it is paid or vests. A deferred bonus can be reduced to nothing.
• Clawback recovers pay that has already been paid or has vested. You are asked to repay money you have received.

Both are usually triggered by defined events: misconduct, a material error in the figures the award was based on, a serious risk failure, or a regulatory breach in the area you were responsible for.

Where they come from

They sit in the plan rules, the bonus policy, or the contract. In banks and investment firms, EU remuneration rules require malus and clawback for variable pay of staff whose work has a material effect on the firm’s risk. Other employers, iGaming groups among them, increasingly adopt them because their parent companies or investors expect it.

Why they matter at exit

An exit is when they are most likely to be used, and when they hurt most. Deferred awards that you thought were yours can be reduced if something is found after you leave. Clawback periods can run for years beyond the last payment.

The risk is greater if you leave in a dispute, or if the business blames the reason for your departure on something within your area.

What to negotiate

• confirmation in the settlement that the employer knows of no event that would trigger malus or clawback;
• a narrow reading of the triggers, tied to defined events rather than general discretion;
• release of malus and clawback on the awards you keep, where the employer is free to give it;
• what happens to awards if a trigger is alleged later: notice to you, and a chance to respond.

A regulated firm may be unable to waive malus and clawback that the rules require. In that case, the negotiation turns to the facts the employer confirms at the time you leave.