Bonus targets communicated too late? Employees may claim damages

Employers must communicate bonus targets in time

For many employees, particularly managers, part of their pay depends on individual or business targets. What happens if the employer does not communicate those targets, or communicates them so late that they can no longer provide an effective incentive?

In its judgment of 22 April 2026, the German Federal Labour Court confirmed employees' rights where employers fail to set and communicate targets. If an employer is required to set suitable targets in time and culpably breaches that duty, it may owe damages for lost variable pay. Merely setting business targets internally is insufficient: the targets must also be communicated to the employee.

Business targets not communicated during the bonus year

The case concerned an employee working as Manager Finance who received a performance-related bonus in addition to her fixed salary. The bonus depended on both individual performance and business targets. The applicable German works agreement required business targets to be set at the beginning of the year.

However, the relevant business targets were not communicated to the employee at any time during the 2022 bonus year. Only in the following year did she receive the bonus calculation and, later, an explanation of the target achievement used. The employer paid just 49 per cent of the target bonus, although her individual target achievement had been assessed at 100 per cent.

The Federal Labour Court treated the failure to communicate the targets in time as a culpable breach of duty. Targets are intended to provide direction and encourage performance. That function cannot be restored for a period that has already ended.

A further EUR 8,339.40 gross awarded

The German Federal Labour Court awarded the employee a further EUR 8,339.40 gross in damages, plus interest. In calculating the loss in this particular case, it assumed 100 per cent achievement of the business targets as well.

When assessing loss, the starting point is generally that an employee would have achieved attainable targets set and communicated in time. This assumption can be rebutted: the employer must substantiate and, where necessary, prove special circumstances pointing against that level of achievement.

In this case, merely referring to a poor financial year or to the possibility that the targets would not have been achieved anyway was insufficient. The judgment does not, however, establish an automatic entitlement to the full bonus whenever targets are communicated late.

For targets set unilaterally, the employer must take the initiative

Where the employer must set targets unilaterally, responsibility generally rests with the employer. The employee does not first have to request that targets be set or communicated. Simply failing to make such a request does not generally reduce a damages claim.

This must be distinguished from arrangements requiring employer and employee to agree targets jointly. In those cases, duties to cooperate and responsibility for the failure to reach an agreement may need separate assessment. A straightforward share of revenue or profits is also not automatically equivalent to an arrangement requiring the employer to set targets.

When should your bonus arrangements be reviewed?

A review may be worthwhile in particular if:

• your employment contract provides for a bonus or variable target-related pay,
• targets were never communicated or were disclosed only after the bonus year had ended,
• targets were set only well into the year,
• an unexpectedly low bonus was calculated after the year had ended,
• the employer relies on business targets that were not achieved but had not previously been specifically communicated to you.

Not every delay in communicating targets gives rise to damages. The specific bonus arrangements, the deadline for setting targets and whether the targets could still provide an incentive are decisive. The legal basis for the claim, fault and the amount of loss must also be assessed in each case.

Keep the documents and check contractual time limits

Substantial variable pay should not be accepted as correctly calculated without review. Relevant documents include:

• your employment contract and amendments concerning pay,
• bonus rules, targets set by the employer or jointly agreed targets,
• applicable German works agreements,
• emails and other communications about targets and changes to them,
• bonus calculations and evidence of payments already made.

Record when each target was communicated to you. Contractual or collective agreement time limits under German law may require you to assert your claim in time and, where applicable, bring proceedings. Claims should therefore be reviewed early and pursued within the applicable deadlines.

How we can help

We advise and represent employees in disputes about pay and employment contract claims under German law.

If your employer has reduced or withheld a bonus or other variable pay, or communicated the relevant targets late, we can review your bonus arrangements, the calculation and any further claims for payment or damages.

Source

German Federal Labour Court, judgment of 22 April 2026 – 10 AZR 28/25 · official judgment in German ↗