Bonus reduction for parental leave: BAG confirms pro rata reduction
The Federal Labor Court (BAG) has confirmed in a recent decision that employers may reduce bonus payments proportionately if an employee has taken parental leave during the bonus period. The decision clarifies how performance-related variable remuneration is to be treated in the context of the statutory suspension of the employment relationship and raises important questions for company practice.
The BAG ruling: No entitlement to full bonus payment during parental leave
The dispute concerned an employee who had taken parental leave in 2022 and claimed a performance-related bonus payment for this year. The BAG ruled that the employer had lawfully reduced the bonus payment for the periods of parental leave because the employment relationship was suspended by law during these phases and there was no entitlement to remuneration. The prerequisite for a full bonus payment is that the work was performed during the relevant period. As no work is performed during parental leave, there is no entitlement to a bonus payment for this period. The employer was therefore allowed to reduce the bonus accordingly on a pro rata basis.
Practical implications: employee rights versus benefits
For employees, the ruling means that bonus regulations must be based heavily on the actual performance and the contractual definition of the bonus. Employees who have achieved outstanding performance before or after parental leave must take into account that periods without actual work performance - such as parental leave - can reduce the total entitlement. The decisive factor is how the bonus is structured in the employment contract, in works agreements or in target agreements and whether it is expressly linked to work performed. In practice, employees should therefore check at an early stage whether and how bonus rules are regulated in their contracts in order to classify possible reductions.
Importance for employers: Creating clarity in bonus regulations
The BAG ruling brings more legal certainty for employers: companies can structure variable remuneration depending on the work performed and take appropriate account of parental leave. However, the responsibility to formulate bonus regulations transparently and with legal certainty increases. Unclear or ambiguous wording can otherwise lead to additional payments or disputes in the event of a dispute. Employers should therefore review existing bonus agreements and - if necessary - adapt them to explicitly specify which remuneration components apply during periods of inactivity in the employment relationship, such as parental leave.
Conclusion: Performance-related bonuses and parental leave legally coordinated
The BAG ruling documents a clear line: bonus payments are not a general entitlement to remuneration, but must be linked to actual performance. Parental leave is considered a dormant employment relationship for employment purposes, which is why a pro rata reduction in bonus payments is lawful. Employees and employers are well advised to carefully define their bonus regulations in the employment contract or in company agreements and to explicitly regulate the possible effects of dormant periods.
