Definition
If the employer is permitted to determine the amount of a bonus at their own discretion, this decision must be transparent and objectively justified. Arbitrary reductions or an unjustified cancellation to zero can be challenged in court – the court may then determine the appropriate amount itself. If the employer has failed to agree on targets in good time, the employee may claim the lost bonus as compensation.
Specialist solicitor in employment law
Over 15 years’ experience in employment law
Classification under employment law
If your employer determines the amount of a bonus at their ‘reasonable discretion’ (Section 315 of the German Civil Code), this decision must be comprehensible, appropriate and verifiable. You can seek a court ruling to overturn an arbitrary or unjustified decision to set the bonus at zero.
Distinction from related terms
Target agreement: In a target agreement, specific targets are set between the employer and the employee. Discretionary decision-making applies, however, when the employer decides on the amount of a benefit within a certain margin.
Reservation of discretion: A reservation of discretion excludes any future entitlement to benefits. The exercise of discretion, on the other hand, presupposes that an entitlement exists in principle, the specific details of which are yet to be determined.
Practical tip
Always ask for a written explanation if your bonus is reduced or withdrawn. Without clear criteria, the court may set the bonus itself – often in the employee’s favour.
