Reduction of variable remuneration in the event of illness: Is this legally possible?  

Employers often agree variable, performance-related remuneration with their employees. The Düsseldorf Higher Labour Court (Landesarbeitsgericht, LAG) has ruled that such remuneration, which is linked to team targets and the sales performance of third parties, may be reduced if an employee is absent due to illness for more than six weeks. This judgement sets out the principles and conditions for such a reduction.

The current case

In the underlying case, the plaintiff worked for the defendant as a sales representative in the field. In addition to a fixed salary, he received variable compensation, 50% of which was linked to team targets (increasing the number of sales partners) and 50% to increasing the results of the sales partners. In the 2021 financial year, the plaintiff was unable to work for a total of 191 days due to illness, including 42 days during which his employer was legally required to continue paying his salary. For the remaining 149 days, the employer reduced the variable remuneration by almost €13,000 gross when calculating his final pay. The plaintiff did not agree with this and took legal action to recover the amount.

Court rulings

The Labour Court dismissed the claim for payment of the approximately €13,000 plus interest. The Higher Labour Court in Düsseldorf also dismissed the plaintiff’s appeal, except for an amount of €177.41 due to a calculation error.

The Higher Labour Court stated that the reduction of the variable remuneration was based on the principle of ‘no work, no pay’ in accordance with Section 326 (1) of the German Civil Code (Bürgerliches Gesetzbuch, BGB). The claimant was absent due to illness for 149 days and was not entitled to continued remuneration during this period. Since the claimant did not perform any work during this period, the defendant was entitled to reduce the calculated variable remuneration pro rata (temporis). Since there were neither contractual deviations nor legal exceptions, the reduction was lawful.

Conclusion

Reducing variable remuneration in the event of extended absence due to illness is legally permissible if the employment contract does not contain any provisions to the contrary.