Think hard before making any special payments….

Employers should think hard before they pay out an annual bonus to their employees – as this may result in an actual ongoing entitlement for employees. According to a ruling of the German Federal Labour Court (Bundesarbeitsgericht, BAG), dated May 13, 2015 (docket number: 10 AZR 266/14) this generally also applies if the employer has paid such a bonus over several years even if the bonus amounts differed.


In the case at hand, the employee received a payment called a “special payment” each January in respect of the previous year. The payout amounts differed and did not relate to the amount of monthly remuneration. When the employee left employment in 2010, he claimed to be entitled to the same payment amount as in 2009. The Federal Labour Court ruled that the employee was entitled to a pro-rated special payment for 2010. However, the payout amount would lie in the employer’s reasonable discretion. The special payments in previous years would need to be considered as an offer to pay out a special payment each year, whereas the actual payout amount should remain in the employer’s reasonable discretion.


Until this ruling, the Federal Labour Court had generally denied the existence of such an offer as described above or a company practice respectively where the amounts paid out differed over the years. Therefore, this ruling marks an important change in the case law. Employers must now consider the consequences even more thoroughly when they think about making any extra payments to employees.