Bonus payment in Switzerland: legal situation, claims and amount

There is no official definition of the term "bonus payment" in Swiss law. Such additional remuneration must therefore be determined in accordance with Article 322 and Article 322d of the Swiss Code of Obligations (CO), depending on the situation and the agreements on salary made when the employment contract was concluded.

Bonuses

Bonuses are voluntary special remuneration (bonuses and premiums) that the employer can pay out to its employees in addition to the usual salary and on a specific occasion - in principle, they therefore depend on the goodwill of the employer. 

Once certain bonuses have been agreed in an employee's contract, the employee is entitled to them from then on. However, the granting of such a bonus can also be linked to certain conditions. 

The 13th salary

The wage or salary is basically the amount of money paid to employees by the employer as remuneration for the work performed or the time spent. Remuneration is usually specified in each employment contract and negotiated individually at the time of recruitment. Article 322 CO obliges employers to pay an agreed or customary salary.

The so-called 13th monthly salary corresponds to 100 % of the employee's regular gross monthly salary. If the payment of a 13th month's salary has been contractually agreed, it is usually paid at the end of the year, but can also be paid at the end of any month with the salary. In the event of an incomplete year of service and if the interruption in working hours is not the fault of the employee, the employee receives a 13th salary in proportion to the time worked, unless the employment contract was already interrupted during the probationary period. In this special case, the employee is not entitled to a 13th salary.

From a legal point of view, the 13th salary falls within the scope of wages and is therefore to be distinguished from other bonuses.

In most cases, the payment of certain bonuses is already stipulated in the employment contract. However, the amount of a bonus or bonus payment does not have to be determined in advance and depends on the employer's subjective assessment. It can also be linked to certain measurable criteria, such as the achievement of a certain turnover or profit.

However, according to the principle of "accessoriness", bonuses should in principle not constitute an employee's main remuneration, but should remain merely additional earnings. However, this principle does not apply to low salaries, where the variable bonuses can also be higher than the basic salary.

The legal principle of bonuses

There are two situations in which bonuses and premiums, can be paid: 

• If an employer has contractually undertaken to pay a bonus, the amount of which is not fixed, he is obliged to pay this bonus in accordance with Article 322d, paragraph 1 CO. However, it is free to pay the amount it wishes at its own discretion. 
• However, if the employer reserves the right to pay a bonus in the contract, it is voluntary and the employee in question is not entitled to the bonus payment.

Even in the case of a basically voluntary bonus payment, the employer may be obliged to pay it in certain cases:

• If a bonus payment has been granted for at least three consecutive years and the employer does not state that it was paid "in good faith", it is already a fixed part of the salary and must continue to be paid.
• If the bonus payment is paid to all of the employee's direct reports and there is no reason for the employee not to receive the bonus, the employee is entitled to it in accordance with the principle of equal treatment under the Federal Constitution and the Gender Equality Act.

Tip: If you wish to assert a claim for an outstanding bonus payment or premium, an employment lawyer can advise you on your individual situation with their expertise and, if necessary, guide you through further proceedings.

Bonuses and bonus incentives for employees can make up a large proportion of annual remuneration. There are different types of bonus payments, each with different threshold conditions for their payment. 

Target bonuses and incentives

The additional remuneration of employees is often based on the achievement of certain sales or profit targets. The advantage of this type of bonus is that the employer can adjust the remuneration to the employee's performance. The metrics for awarding a target bonus are usually departmental turnover, departmental income after deducting operating costs, earnings before interest and taxes, etc. 

For example, a production manager may receive a bonus calculated on the basis of production turnover less production costs.

Bonus payments for individual and personal targets

In addition to the collectively defined targets, an employee can also receive bonuses or bonus payments that are linked to individual personal targets, e.g. the completion of certain tasks. 

For example, an employee may be entrusted with the management of a project to introduce a new computer programme. If the project is successfully completed, she receives a bonus.

Systematic awards and bonuses

There are also a number of bonuses that are awarded on a regular basis. These include the following bonuses:

• Volume bonus: The bonus is calculated according to the number of units, weight, etc. of production.
• Quality bonus: The bonus rewards the quality of an employee's production, which is measured using various parameters.
• Savings bonus: The bonus is granted for the employee's use of economical work equipment, e.g. for the use of certain types of materials in production.

For example, it is common for lorry drivers to receive a maintenance allowance to cover the routine maintenance of their vehicle and any repair costs up to a certain amount. 

Another example: an employee receives a systematic quality bonus if 98% of the electromechanical components they produce pass the quality inspection.

One-off bonuses

It can also happen that an employee receives ad hoc and spontaneous bonuses if the employer wishes to recognise them in a special way. This type of bonus is intended to reward exceptional personal performance or special commitment spontaneously and without bureaucratic effort. For example, it is conceivable that an employee could receive a bonus for a special assignment that required a special and unexpected amount of work.  

The granting of these bonus payments is at the discretion of the employer and is in no way obligatory. On the other hand, for reasons of transparency and fairness among employees, it is important that there are clear allocation guidelines for the selection of team members who are eligible for these bonuses.

The terms "incentive", "reward or "premium" are not defined in the Swiss Code of Obligations. From a legal perspective, it is instead necessary to use the term "bonus" and to determine whether the payment is the subject of such a bonus.

The Code of Obligations mentions bonuses in Article 322d, paragraph 1 CO and states that employees have a legal right to special remuneration - i.e. bonuses - on certain occasions (such as Christmas) if these have been agreed in advance.

However, the granting of a bonus can be made dependent on whether the employee is still working for the company at the agreed time of payment. Article 322d, paragraph 2 CO states that an employee may be entitled to a partial payment of the agreed bonus if the employment relationship has already ended at the agreed payment date. Here too, however, the restriction applies that this pro rata payment must have been agreed in writing beforehand in order for the employee to be legally entitled to it.

However, if the special payment is part of the salary, it cannot be linked to the condition that the employee must still be employed by the company in order to receive it.

In principle, employers have a certain amount of discretion when it comes to the payment and in particular the amount of premiums and bonus payments. This is particularly relevant if these special payments depend not only on certain business results, but also on the employer's subjective assessment of the employee's work performance.