UncategorizedSpringtime is bonus season – new rules in 2026

Springtime is bonus time – and for many employers, it marks the start of another round of empty promises
With the arrival of spring, the season of variable pay also begins in many companies. This is when bonuses are calculated, new targets are set and long-term incentives are promised. For employees, however, this often marks the start of the same old game as every year: Targets are set late, bonus rules are ‘explained’ after the event, and following a resignation, everything is suddenly supposed to lapse.
The good news: employers are not as free as many of them believe when it comes to bonuses, profit-sharing and share-based remuneration.
In recent months, the Federal Labour Court has handed down several rulings that send a clear message: variable remuneration is not a matter of grace. Clauses with which employers seek to elegantly wriggle out of payment are, in most cases, invalid.

Those who set targets too late may still end up owing the full bonus
Particularly relevant is the Federal Labour Court’s ruling of 19 February 2025 (10 AZR 57/24). It concerns a case where the employer sets the targets unilaterally.
The Federal Labour Court has made it clear: if these targets are set too late, it will cost the employer dearly. This is because targets are intended to motivate and steer performance. If they are only set once a significant portion of the target period has already passed, this function is effectively lost. In other words: anyone who sets the rules late in the game cannot subsequently rely on that set of rules.
In practice, targets are usually set in the spring, but are sometimes ‘added on’ much later. This is then presented as normal. But it is not. If the setting of targets is delayed, a claim for damages may arise. Ultimately, this can even result in the full bonus being owed.

The employer cannot use the excuse that the employee did not remind them of the targets. The burden of proof is generally on the employer.

A target agreement means negotiation – not dictation
Even more important for many employees is the Federal Labour Court (BAG) ruling of 3 July 2024 (10 AZR 171/23). This case did not concern a target being set, but rather a target agreement.
In a target agreement, the employer may not simply set the targets unilaterally. They must negotiate and give the employee a genuine opportunity to influence the targets. This was precisely a popular trick in practice for a long time: the contract stated ‘target agreement’, but in reality the targets were ultimately dictated from above.

The BAG has put a stop to this.
Anyone who contractually undertakes to agree on targets generally fulfils this obligation only if they conduct genuine negotiations. Merely getting the employee to rubber-stamp the terms is not enough. And if the negotiations fail, the employer cannot simply switch to setting targets unilaterally just because it suits them better.
This is important for employees because many bonus schemes sound better on paper than they are in practice. If the contract states “target agreement”, this does not mean that the employer simply comes up with something and the employee is allowed to agree politely.
Repayment clauses are invalid
The same ruling of 3 July 2024 contains a second important message. The Federal Labour Court (BAG) has ruled that a clause requiring the repayment of a bonus or special payment if the employment relationship ends within six months of payment – regardless of the reason – is invalid.
Such clauses are still surprisingly common in employment contracts and bonus terms. They are intended to exert pressure: whoever resigns must pay.

Those who leave should be punished. Such clauses are all invalid.
For variable remuneration already earned is not an inducement that the employer may subsequently reclaim. If a bonus is remuneration for work performed, it cannot simply be devalued by means of a blanket repayment clause.

Share options and LTIs don’t simply lapse just because an employee resigns
Finally, the Federal Labour Court (BAG) ruling of 19 March 2025 (10 AZR 67/24), which our firm successfully argued, is particularly significant. It concerned the lapse of virtual share options following the termination of the employment relationship. The issue is highly relevant, particularly now in the spring. In many corporations, new long-term incentive programmes are launched between March and May. These often involve virtual options, restricted stock units or other share-based remuneration models. For many employees – particularly at management level – this can quickly involve substantial sums.
The bad news for employers: The Federal Labour Court (BAG) has made it very clear that such entitlements also constitute remuneration. Share-based remuneration is not a gift, but consideration for work already performed. And that is precisely why clauses stipulating that these entitlements lapse upon voluntary resignation are highly problematic from a legal perspective. This is all the more true when such forfeiture clauses are intended to effectively deter employees from changing jobs.

The ruling is therefore a warning signal to all companies that still operate under programme terms whereby share options already earned simply lapse upon leaving the company. Many do so anyway – in the hope that those affected are unaware of their entitlements or shy away from legal disputes.
Anyone with share-based remuneration should pay particular attention to these remuneration components, especially in the case of termination agreements and dismissals. It is precisely here that there is often considerable financial potential.

What employees should do specifically now
Anyone receiving bonus documents, target sheets or LTI documents this spring should look not only at the figure, but also at the rules behind it. We can help you understand your contractual provisions and offer tactical advice. Furthermore, employees should secure all relevant documents: bonus schemes, emails regarding targets, target sheets, incentive plans and payslips. In the event of a dispute, employers are keen to cut off access to these documents. Be better prepared!
It is already April and your employer has not yet sought to agree on targets? Then politely remind your employer by email and take a screenshot of the reminder email. Some employment tribunals rule that the employee has a duty to cooperate, which they fulfil by reminding the employer of the target agreement.
And finally, as is so often the case in employment law: do not wait too long. Many employment contracts contain limitation periods. Anyone who fails to assert their claims in good time may lose them – even if they are actually well-founded in substance. We support you in enforcing your claims.

 

We’re happy to help with any questions you may have about your variable pay! Please contact us at mail@rvk.law!