News

The bonus scheme has become an integral part of the modern employment package. Sometimes a significant part of an employee’s remuneration depends on the bonus. This bonus is often wholly or partly discretionary. This means that ultimately granting the bonus or changing the scheme itself is at the employer’s discretion. Recently, there have been some important rulings on the question of how far the employer’s freedom extends when determining or changing a discretionary bonus.

The following principles can be inferred from these statements:

1. The manner in which the employer uses a discretionary power shall be tested against the standards of good employment practice pursuant to Section 7:611 of the Civil Code.
2. This refers not only to the result arrived at by the employer, but also to the procedure preceding the decision and the reasons for the decision. In doing so, the employer must observe the following principles:

• principle of care;
• principle of trust;
• principle of justification; and
• proportionality principle.

Conclusion:

If the employer makes use of discretion in a bonus scheme, it should do so as a good employer and with the utmost care.

The less discretionary space the bonus scheme leaves, the more difficult it will be to attack it.

Case law consulted:

Amsterdam Court of Appeal 18 January 2022, ECLI:NL:GHAMS:2022:140 and Supreme Court 12 May 2023, ECLI:NL:HR:2023:693.
Central Netherlands District Court 13 December 2023, ECLI:NL:RBMNE:2023:6876.