Definition
A bonus is an additional payment on top of the fixed salary, which depends on the achievement of targets, the company’s performance or the employer’s discretion. The legal basis may be the employment contract, a works agreement or a collective agreement. If a bonus is paid for several years without reservation, the employee has a legal entitlement to it in future. A discretionary clause excludes this entitlement – but must be worded clearly and consistently. The decision regarding the amount and award must be objectively justifiable and subject to judicial review.
Specialist solicitor in employment law
With over 15 years’ experience in employment law
Classification under employment law
Bonus payments often depend on agreed targets, company profits or individual performance. The decisive factor is what is stipulated in the employment contract or in a works agreement – and whether the employer has exercised their discretion correctly (Section 315 of the German Civil Code).
Distinction from related terms
Commission: Commissions are directly linked to specific sales or deals. Variable remuneration may also be linked to qualitative or company-wide targets.
Profit-sharing: Profit-sharing is usually based on the company’s success and is often paid to managers. Variable remuneration can be broader in scope and may also include individual target agreements.
Practical tip
Practical tip: Has your employer failed to set targets, even though they were obliged to do so? If so, you may still be entitled to a bonus – in some cases, even 100% of the target bonus. Make a note of whether targets were set for you and when.
