Definition
Variable remuneration is the collective term for all performance- or results-related payments in addition to the fixed salary – such as bonuses, commissions, incentives or profit-sharing payments. Whether a legal entitlement exists is determined by the employment contract, a collective agreement, a works agreement or established company practice. If the remuneration is linked to target agreements, the employer must set the targets in good time and in a reasonable manner; if they fail to do so, the employee may claim the lost bonus as compensation. Provisions regarding voluntary participation and the right of withdrawal must be formulated transparently and without contradiction; otherwise, they are invalid.
Specialist solicitor in employment law
With over 15 years’ experience in employment law
Classification under employment law
Variable remuneration components (bonuses, commissions, performance-related bonuses) are only enforceable if they have been bindingly agreed in a contract or through a works agreement. Reservations regarding voluntary nature may exclude a claim – but only if they are validly formulated and are not combined with a right of withdrawal.
Distinction from related terms
Bonus: A bonus is a specific form of variable remuneration, often linked to the achievement of targets. Variable remuneration may also encompass other models and criteria.
Commission: Commissions are directly linked to sales or deals achieved. Variable remuneration may also be tied to overarching targets, independent of individual deals.
Practical tip
Does your contract contain both a discretionary clause and a revocation clause regarding variable remuneration? The Federal Labour Court (BAG) considers such a dual clause to be invalid – with the result that a binding claim may arise. Have your contract clauses reviewed by a solicitor before waiving any claims.
