Salary incentives and Bonuses in Spain
In Spain, bonuses are salary supplements as defined in Article 26.3 of the Workers’ Statute (Estatuto de los Trabajadores). This remuneration scheme is based on the company’s performance or on the employee achieving certain objectives. At the outset, the company should set requirements that entitle an employee to receiving a bonus.
Any modification to the accrual of a bonus is subject to the provisions of Article 41 of the Worker’s Statute and must include an amendment to the employment contract. Additionally, given the negotiated character of this salary supplement, Articles 1115 and 1256 of the Spanish Civil Code are also applicable.
Moreover, in Spain, workers are entitled to receive payment of bonuses even if the employer has violated his or her disclosure obligations. This obligation implies that the employer must ensure that his or her employees are aware of the conditions and objectives that employees must meet in order to receive a bonus. If the employer does not clarify the requirements of the objective employees must meet, the judge can adopt an interpretation most appropriate to give the bonus clause effect.
Since a bonus has a salary character, it must be included in the compensation in case of dismissal. There are only two possibilities that allow not including it: first, if both parties have agreed not to include it; and second, if the bonus had been paid in exceptional circumstances (regardless of the achievement of certain goals).
Even in cases where the company faces serious financial difficulties and must proceed with economic layoffs, Spanish law requires that the incentives due be included in the compensation.
In its judgment of 4 December 2013, based on settled law, the Superior Court of Madrid (Tribunal Superior de Madrid) ruled that In the case of an unfair dismissal, the compensation must be calculated based on both the salary amount and the terms of Article 26.1 of the Worker’s Statute. Additionally, the appellant must include the bonus earned in the year of the dismissal.
In France, the payment of bonuses is very similar. First, both parties have to agree on the results the employee must achieve and the employee must be informed on the calculation mode of the bonus amount.
However, a new court ruling from the French Court of Cassation, on 12 February 2015, exempts employers from paying bonuses for failure to meet objectives due to economic difficulties.
This article is not considered as legal advice