Does an employer have to continue to pay a bonus during illness?
The question of whether an employer is obliged to pay a bonus to an employee who is ill regularly arises in practice. This will depend on various factors, such as the type of bonus and the agreements in the employment agreement or collective labour agreement. Below we will explain the most important issues.
Legal rules
Dutch law mandates that employers continue to pay at least 70% of the (maximum) daily wage for up to 104 weeks during an employee's illness (Article 7:629 of the Dutch Civil Code). Often, employment agreements or collective labor agreements stipulate higher percentages, such as 100% in the first year of illness.
Article 7:629(1) of the Dutch Civil Code applies only to wages determined "according to time," including monthly wages, shift allowances, holiday allowance, and a thirteenth month. For wages not determined by time—such as overtime, piecework, commission, or performance bonuses—the law states that a sick employee is entitled to the average amount they could have earned if not sick.
The entitlement to a bonus during illness depends on the type of bonus:
- Bonus based on personal performance
A personal performance bonus is awarded when an employee meets individual goals. If an employee is sick but can demonstrate reasonably that they would have met these goals if not sick, they are generally entitled to this bonus. - Bonus based on company performance
A bonus dependent solely on company performance, such as meeting a profit level, usually does not need to be paid during illness. Exceptions may apply if different agreements exist or if good employment practices justify a payout. - Bonus with mixed conditions
For bonuses dependent partly on individual performance and partly on company performance, a sick employee often has the right to a proportional part of the bonus, depending on the extent to which individual performance can be assessed.
Determining the amount of a bonus during illness
If the employer must pay a bonus during illness, the next question is how much should the bonus be. The law states that the employee is entitled to the bonus they could have earned if not sick. In practice, this can be challenging to determine since the goals were not met due to illness. Commonly, employers use the average bonus over the past three years, a method also applied when calculating the transition allowance.
Excluding bonuses during illness
Exclusion is possible only if an employee receives at least 70% of the maximum daily wage in total during illness. Different agreements can be made regarding amounts exceeding this; these agreements must be clearly documented in writing as part of the employment agreement. In exceptional circumstances, such an agreement may not hold, for example, if the illness was caused by the employer or if discrimination based on chronic illness occurs.
Conclusion
Whether an employer should continue to pay a bonus during illness depends on the salary amount, the type of bonus, and the existing agreements with the employee. These agreements should be clearly documented in the employment contract to prevent misunderstandings: clear agreements are essential.
