Late Bonus Targets Could Cost Employers: German Court Shifts Burden of Proof
Published on 07/29/2026 at 14:24 | Redaktion boerse-global.de
German companies that delay setting bonus targets may soon face hefty payouts, after a landmark ruling from the Federal Labour Court (BAG) tightened the rules on variable compensation.
The court, in a decision published on 22 April 2026 (case reference 10 AZR 28/25), established a presumption in favour of employees when performance goals are communicated too late. If an employer sets targets unilaterally, they must inform workers early enough that the employee can still influence the outcome. When notification is delayed or omitted entirely, the law now assumes the employee met all their objectives in full.
The employer then bears the burden of proving the bonus would not have been earned even with timely goal-setting — a task legal experts describe as extremely difficult in practice.
This ruling lands as companies are also grappling with the EU Pay Transparency Directive (2023/970). Although the transposition deadline passed on 7 June 2026 and Germany has yet to enact a national law, advisers are urging immediate adjustments to compensation structures.
The directive demands objective, gender-neutral pay systems. Firms with 100 or more employees face extensive reporting obligations. Job applicants, meanwhile, gain the right during interviews to learn the starting salary or its range — a shift that could reshape hiring negotiations across the country.
Clearer rules on leave and travel time
The BAG also clarified other employee rights. On 25 March 2026 (case reference 5 AZR 108/25), it ruled that blanket release clauses in standard-form contracts are invalid. Employers can no longer send staff home after giving notice without a concrete reason.
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Separately, the European Court of Justice classified travel time in a company vehicle to changing work sites as working hours, in a judgment from 9 October 2025 (case reference C-110/24). That affects roughly 2.4 million workers in Germany — including those in nursing and construction. Combined with the minimum wage of €13.90 per hour (in effect since January 2026), the ruling could trigger significant back-pay claims.
Digital time tracking on the horizon
Workplace time recording is also set to go digital. Building on the BAG's 2022 ruling and a current draft bill, 2026 is expected to bring widespread digitalisation of timekeeping. Deadlines are staggered by company size: large firms with over 250 employees must convert faster, while small businesses with 10 to 49 staff get up to five years. Trust-based working hours remain permissible, but they do not exempt employers from the documentation obligation.
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