At the end of the year, bonuses come back into the spotlight in many companies. Variable compensation is a popular means of allowing employees to participate in the success of the business result and thus strengthen their motivation and loyalty.
As the name says, the special bonus is an additional payment from the company paid to employees in addition to the regular salary. If this payment is made in addition to the wage for a specific reason, this special remuneration is called a “gratification” (Art. 322d OR). The bonus can be an integral part of employee motivation, is a popular instrument and occurs in different ways in practice.
Tied to business results or performance
The 13th monthly salary is now structured as a bonus in many places. In some companies, however, the thirteenth is part of the fixed salary, and a bonus is paid as a profit sharing. In this case, it is usually communicated that the payment is due to the positive business result. Performance-related bonuses work differently; they are based on individual performance and measured against predetermined goals or key performance indicators. Setting realistic, measurable goals is essential to motivate employees effectively. This can happen, for example, in agreement discussions between the HR department, superiors and employees. The company’s short, medium and long-term interests should be considered and incorporated.
Wide variety
Bonuses also include indirect or non-monetary remuneration such as employee shares or options. In this case, employees receive company shares or can purchase them at reduced rates.
Special allowance with a tripping hazard
Companies should declare bonuses as “voluntary special remuneration”. Regularly paid out, special remuneration can be viewed as a de facto fixed salary component after a certain duration. Companies whose special remunerations solely depend on the business results will withhold it in bad years or reduce it proportionally to the business results. Otherwise, a legal claim can arise from customs. It is common practice that a three-time, uninterrupted and unconditional bonus payment can be qualified as an implied contractual agreement based on the principle of trust. The company’s supposedly voluntary payment is then transformed into an actionable wage claim by the employee.
Different wage and bonus models
Like the salary, the bonus can also be contractually agreed upon as a regular part of the salary. This means that employees are entitled to bonus payments within the scope of the contractual agreement. It is widespread in the insurance industry, in sales and in financial institutions. Depending on the industry and business area, the advantages and disadvantages of different wage and bonus models must be weighed up. In addition to fixed bonuses, loyalty or performance remuneration are popular variable salary components.
Regardless of the type or bonus system, it pursues one goal: The bonus should express recognition for the work done, motivate employees and strengthen loyalty to the company. We would happily advise you on the optimal solution for your company and employees.
