Variable remuneration systems are becoming increasingly popular on the labour market as employers want to encourage their employees to perform better or reward special commitment. Also employees themselves are increasingly asking for additional variable salary components.
A medium-sized company asked us to develop a legally compliant variable remuneration system.
We first analysed the company's specific needs. Should it be more about creating an incentive for employees to achieve specific targets? Then a classic target agreement or target setting would be the best solution. Or does the employer want to be as flexible as possible in terms of payout, for example because specific targets are difficult to define in advance or are often revised during the target achievement period? Then a discretionary bonus could help. In the case of the discretionary bonus, the questions of whether a bonus is paid at all, how much it is and for what specific performance are left to the discretion of the employer. In addition to its high degree of flexibility, the discretionary bonus has the advantage of reducing the risks of a target agreement or target setting that is either not achieved or cannot be verified. In the event of failure to agree on or set objectives or targets, or if it cannot be proven that they have been agreed or set, the employer must, in case of doubt, pay the full bonus as compensation, even if the employee's performance may not have been in line with this.
Our offer for you
We are happy to advise you on the development of a variable remuneration system that is perfectly tailored to your needs.
Dr. Julia Pfrogner has published an article on the discretionary bonus in BB 2018, 757 ff.
We will be happy to send you this on request; a short e-mail is sufficient.