Bonus disputes are everywhere in finance, tech, and senior management. The employer says: “the bonus is fully discretionary; there is no entitlement.” German labor courts apply a much more sceptical lens.
The legal starting point
Even where a contract grants the employer discretion over the bonus, the discretion must be exercised “according to equitable consideration” (billiges Ermessen, § 315 BGB). That means the employer must:
- Take all relevant factors into account — your performance, the company’s results, comparable practice in prior years;
- Apply the discretion transparently and explain the reasoning if asked;
- Not act arbitrarily.
A bonus payment of zero is almost never within equitable consideration if the underlying conditions (target attainment, company profitability) were met. Courts can — and frequently do — set the bonus themselves where the employer’s exercise of discretion is found unlawful.
When the “discretionary” framing fails entirely
Some contracts dress up what is in substance a fixed bonus as discretionary. Three patterns frequently make the discretion clause unenforceable:
- Pattern of payment. If the bonus has been paid in a consistent formula for many years, an entitlement may have crystallised by operational practice (betriebliche Übung) and the discretion is gone.
- Target letter with formula. If you receive an annual target letter that mathematically links a target attainment to a payout, the bonus is in substance contractual and the “discretionary” label is decorative.
- Lack of transparency. A clause that allows discretion without setting out the criteria fails the AGB transparency standard under § 307 BGB and is void.
The “must be employed on the payment date” clause
Many bonus clauses condition payment on the employee being employed on a specific date months after the bonus year ended. The Federal Labor Court has struck these clauses down as inappropriate restraints on employee mobility wherever the bonus is more than a token amount (BAG 18.01.2012, 10 AZR 612/10). If your bonus was withheld because you left between bonus accrual and payment date, the clause is likely unenforceable.
What we ask for
- The bonus clause from your contract and any plan documents.
- Your target letters and any KPI dashboards for the bonus year.
- The bonus payments you actually received in prior years (with payslips).
- Any internal communication explaining the bonus decision.
From this, we usually have a clear picture within an hour of whether a claim is realistic and how much it is worth.
The “must be employed on the payment date” hook
The BAG (18 January 2012, 10 AZR 612/10) struck down clauses that condition payment on employment at a date well after the bonus year ended. The rationale: a bonus that is in substance earned remuneration cannot be retracted by an arbitrary cut-off date, because that would be an inappropriate restraint on the employee’s right to terminate the employment. The clause survives only for genuinely “loyalty-tied” bonuses (Gratifikationen) of modest size — typically a Christmas bonus of one monthly salary or less.
Equitable consideration in practice
When the employer decides on the bonus amount, the discretion must be exercised “according to equitable consideration” (§ 315 BGB). Courts check that the employer (a) considered all relevant factors — your performance, the company’s results, comparable practice in prior years — and (b) can explain the reasoning if asked. A bonus of zero in a profitable year, after years of consistent payouts at a comparable level, almost never survives this test.
The discovery problem
To make the case stick, we need internal documents: bonus plans, target letters, prior-year payouts, KPI data, peer-group comparators. Some of these are accessible to you (your own payslips, target letters); others must be obtained from the employer via court-ordered disclosure. Plan for a request for documents (Auskunftsklage) as a procedural building block in larger bonus cases.