Under German employment law, employees who resign during the year may entitled to receive a Christmas bonus, or at least a share of a Christmas bonus. The way in which the Christmas bonus is calculated is decisive.
German employment law and Christmas bonuses
Germany’s Federal Employment Appeal Tribunal recently held that employees who are dismissed during the year are entitled to receive a Christmas bonus. The decisive aspect is whether the Christmas bonus is calculated based on a monthly compensation amount for work rendered (case ref.: 10 AZR 848/12).
Christmas bonus dispute
The judgment came after a Frankfurt-based auditor resigned on 30 September 2010 and demanded part payment of his Christmas bonus for the nine months during which he had worked.
The employment contract contained a clause stating that the employer would pay “a twelfth of the employee’s monthly gross salary as a Christmas bonus for each month of job performance”.
Germany’s Federal Employment Appeal Tribunal ruled that as the payment of the Christmas bonus was not linked purely to the existence of the employment relationship but to the monthly employment performance, the employer was obliged to pay for work completed in the form of a share of the Christmas bonus.
Summary: If the payment of a Christmas bonus is linked to the performance of the employment obligations and not just to employee loyalty, an employee who resigns during the year will still have a right to receive a share of the Christmas bonus. In such cases, a so-called cut-off date is in invalid.