Two ways of setting bonus targets
German employment law distinguishes mutually agreed targets (Zielvereinbarung) from targets set unilaterally by the employer (Zielvorgabe). A unilateral determination is an exercise of the employer’s right to specify performance and must reflect equitable discretion (billiges Ermessen, section 315 (1) German Civil Code — BGB). It binds the employee only if it is equitable (section 315 (3) sentence 1 BGB), and the courts review this in full (section 315 (3) sentence 2 BGB). The employer bears the burden of proving that its determination stayed within those limits.
Which model applies follows from the employment contract, the bonus plan or a works agreement (Betriebsvereinbarung). Mixed systems are common: company targets are imposed, individual targets are agreed. That was the setup in the case decided now — and the distinction matters, because it determines who must act and whether the employee can be blamed for staying passive.
The case: a bonus calculated from targets nobody announced
The claimant, a finance manager employed since 1999, had a contractual target bonus of 15 % of her gross annual salary. A works agreement dated 28 January 2021 provided that the payout equals an individual modifier multiplied by a financial modifier (0 % to 200 %). The financial modifier of her division consisted half of a sales target and half of an EBIT target, with 100 % for full achievement and 50 % at the minimum threshold. The specific targets were to be fixed at the beginning of each year on the basis of the annual financial plan.
The annex containing that plan did not exist, and no company targets for 2022 were ever communicated to the claimant. In March 2023 the employer nevertheless paid a bonus of EUR 8,012.37 gross — 49 % of the target bonus of EUR 16,351.78 (individual achievement 100 %, financial modifier 49 %). It later explained that the EBIT threshold had been missed, the sales target had been met at 70.25 %, which after weighting produced 36 %, increased “voluntarily” by 13 points.
The claimant sued for the difference: EUR 16,351.78 − EUR 8,012.37 = EUR 8,339.41, claimed rounded down by one cent to EUR 8,339.40. The Siegburg Labour Court (judgment of 24 January 2024, 4 Ca 1104/23) and the Cologne Regional Labour Court (judgment of 5 September 2024, 6 SLa 102/24) dismissed the claim. The Federal Labour Court awarded it in full, with interest from 1 April 2023, because the payout date was fixed by the calendar (sections 288 (1), 286 (2) no. 1 BGB).
Targets must reach the employee
The core of the ruling: setting targets is the exercise of a unilateral right that must be declared to the other party (section 315 (2) BGB). In the court’s words:
„Die Erklärung ist eine einseitige empfangsbedürftige Willenserklärung mit rechtsgestaltendem Charakter.” (para. 25)
In English: the declaration is a unilateral declaration of intent that requires receipt by the addressee and shapes the legal relationship. A board resolution, an entry in a controlling system or a decision at group headquarters does not trigger the bonus mechanism. The court added that the very word „Vorgabe” (setting of targets) requires communication to the party whose pay depends on the targets (para. 26) — and if the works agreement obliged the employer to inform staff about later adjustments, informing them about the original targets was required all the more.
Once the bonus year is over, damages replace the targets
Targets only work forward. Employees are meant to know during the year what the employer will pay for:
„Die Festlegung von Zielen durch eine Zielvorgabe wird jedenfalls mit Ablauf der Zielperiode unmöglich iSv. § 275 Abs. 1 BGB.” (para. 19)
Setting targets becomes impossible at the latest when the bonus period ends (section 275 (1) BGB). From then on the employee can claim damages in lieu of performance under sections 280 (1) and (3), 283 sentence 1 and 252 BGB. The employer’s fault is presumed (section 280 (1) sentence 2 BGB), and a mistaken reading of its own works agreement does not excuse it (para. 30). The same applies to targets announced far too late: in its judgment of 19 February 2025 (10 AZR 57/24) the court awarded damages where the targets for 2019 had been communicated only at the end of September 2019, too late to motivate anyone. There is no fixed cut-off date — commentators refer to roughly three quarters of the period as a rule of thumb, but what counts is whether the targets could still steer the employee’s work.
The 100 % presumption
The damages cover lost earnings (section 252 BGB), estimated by the court (section 287 (1) German Code of Civil Procedure — ZPO). The starting point strongly favours the employee:
„Es ist deshalb grundsätzlich davon auszugehen, dass ein Arbeitnehmer vorgegebene Ziele erreicht hätte, wenn nicht besondere Umstände diese Annahme ausschließen.” (para. 35)
It is presumed that the employee would have achieved the targets in full unless the employer proves special circumstances. The 2026 judgment extends this presumption to company targets such as sales and EBIT. The employer would have had to set achievable targets, judged by a forecast at the time of setting them, and it cannot escape the promised bonus by demanding the impossible (para. 35). The standard defence — the numbers were too weak anyway — is the defence of lawful alternative conduct, which the employer must prove. The mere possibility that the targets would have been missed is not enough (para. 41). In the case, the employer relied on missed financial thresholds but never proved that a timely, achievable set of targets would have produced the same payout. The employee, by contrast, does not have to explain what she would have done differently. The math: 100 % of EUR 16,351.78 minus EUR 8,012.37 paid = EUR 8,339.40 gross awarded.
No contributory negligence
The employer argued that the claimant had never asked for targets during the year (section 254 BGB). For unilaterally set targets the court rejects this entirely:
„Die Initiativlast trägt allein der Arbeitgeber.” (para. 47)
The initiative lies with the employer alone. The employee need not request targets and need not sue during the year to have a court set them (para. 47). The rules differ for mutually agreed targets: there the employee must take part in the process, and complete passivity can reduce the claim — by 10 % in the judgment of 17 December 2020 (8 AZR 149/20). Standard-form fallback clauses allowing the employer to impose targets once negotiations fail are invalid, because they undermine the agreed priority of negotiation (judgment of 3 July 2024, 10 AZR 171/23, section 307 BGB). The line of case law goes back to the judgment of 12 December 2007 (10 AZR 97/07).
Practical steps
- Check the legal basis of your bonus: contract, bonus plan, works agreement — who had to set or negotiate the targets, and by when?
- Reconstruct what was actually communicated to you and when: e-mails, kick-off presentations, HR systems, appraisal notes. Missing evidence works against the employer.
- Calculate the target bonus (here: 15 % of annual salary) and the shortfall against what was paid.
- Watch the deadlines: German contracts and collective agreements often contain forfeiture clauses (Ausschlussfristen) requiring claims to be raised within three months of falling due, usually in text form such as e-mail. Independently, the statutory limitation period is three years from the end of the year (sections 195, 199 (1) BGB).
- The claim survives the end of the employment — disputes about bonus targets in Germany typically surface when people leave, next to the Aufhebungsvertrag, the taxation of the severance payment and the notice period.
Bonus paid short — how to check your claim
Identify the construction: unilateral Zielvorgabe or negotiated Zielvereinbarung. Check whether the targets for the period were announced to you personally — and when. Calculate the target bonus and compare it with what was paid and how the payment was justified. Review the contract and any collective agreement for forfeiture clauses (Ausschlussfristen). Raise the claim in text form before the deadlines expire and secure the evidence: e-mails, presentations, bonus statements.
What if you were on sick leave during the bonus year?
Damages for targets that were never set are one thing — periods without pay are another. For sickness beyond the six-week continued-pay period (Entgeltfortzahlung) and for periods when the employment relationship is dormant (such as parental leave), the employer may reduce performance-based pay proportionately, even where the targets were met (Federal Labour Court, judgments of 02.07.2025, 10 AZR 193/24 and 10 AZR 119/24). How this reduction works and where its limits lie: Bonus and Christmas bonus during sick leave in Germany.
Frequently asked questions
Do I have to ask my employer for targets first?
No. Where the employer sets targets unilaterally, the initiative lies with the employer alone and your passivity does not reduce the claim (10 AZR 28/25). Where targets are negotiated, refusing to engage can reduce the award — by 10 % in decided case law (8 AZR 149/20).
How much can I claim?
The full target bonus for 100 % achievement, minus anything already paid. It is for the employer to prove special circumstances that would lower this amount.
My employer says the company results were too weak.
Without announced targets this defence rarely works. The employer must prove that the payout would have been exactly the same had achievable targets been set on time — a mere possibility is not enough (para. 41).
What deadlines apply?
First check contractual or collective forfeiture clauses — often three months from the due date. The general limitation period is three years from year-end (sections 195, 199 (1) BGB). Interest runs from the agreed payout date (sections 288 (1), 286 (2) no. 1 BGB).
When is a target “too late”?
There is no fixed date. Targets announced at the end of September of the relevant year were treated as too late (judgment of 19 February 2025, 10 AZR 57/24). The test is whether the targets could still motivate and steer the work.
Sources: BAG, judgment of 22 April 2026 — 10 AZR 28/25 (ECLI:DE:BAG:2026:220426.U.10AZR28.25.0). BAG, judgment of 19 February 2025 — 10 AZR 57/24. BAG, judgment of 3 July 2024 — 10 AZR 171/23. BAG, judgment of 17 December 2020 — 8 AZR 149/20. BAG, judgment of 12 December 2007 — 10 AZR 97/07. Lower courts: Siegburg Labour Court, 24 January 2024 — 4 Ca 1104/23. Cologne Regional Labour Court, 5 September 2024 — 6 SLa 102/24. Quotations from the official text of the judgment. This article is general information, not legal advice.