Definition
Target agreements are objectives agreed upon individually between the employer and the employee, the achievement of which forms the basis for variable remuneration. They must be specific, measurable and achievable. In contrast, targets are set unilaterally by the employer. If the employer fails to agree on targets in good time or sets unrealistic targets, the employee is entitled to compensation amounting to the bonus that could reasonably have been achieved. Unclear or contradictory provisions are to the employer’s detriment.
Specialist solicitor in employment law
With over 15 years’ experience in employment law
Classification under employment law
Target agreements form the basis for performance-related pay. A distinction is made between agreed targets (mutually agreed) and unilateral targets set by the employer. If the employer has failed to agree or set targets in good time, the employee may claim damages amounting to the lost bonus.
Distinction from related terms
Target agreement: Targets are set by mutual agreement between the employer and the employee. Both parties are involved in determining the content and structure.
Target setting: The targets are determined unilaterally by the employer. The employee generally has no influence on the specific details.
Practical tip
Are your targets regularly set just before, or even after, the end of the appraisal period? This is no trivial matter – it gives rise to a claim for compensation. Make sure you document every meeting and every commitment in writing. If you haven’t been set any targets, you don’t necessarily have to forgo your bonus.
