Many companies continue to use bonus systems designed years ago without having adapted them to new legal requirements regarding equality, work-life balance, and non-discrimination. This situation can give rise to significant labor-related risks.
The implementation of performance-based variable compensation systems is an increasingly common practice among companies. These mechanisms help incentivize performance, retain talent, and align the organization’s interests with those of its employees.
However, designing these systems requires more than simply setting goals and establishing payout percentages. Experience shows that many internal policies contain criteria that can lead to labor disputes, especially when the calculation of incentives is affected by absences from work.
A recent ruling by the Supreme Court (SC), in its Decision No. 522/2026 of May 29, 2026, reiterates that employers’ freedom to design bonus systems has limits and that such systems must, in all cases, respect the principles of proportionality, equality, and non-discrimination.
The company may link the bonus to the time worked
As a general principle, it is perfectly valid for variable compensation to be calculated based on the time worked.
However, this approach requires that there be a genuine proportionality between the period of service and the established objectives. It does not seem reasonable to demand the same level of results from someone who has worked the entire fiscal year as from someone who has been absent for several months.
Therefore, when the actual time worked decreases, the objectives or parameters used to measure performance must also be adjusted accordingly.
Incentive systems must clearly define how objectives are adjusted in the event of absence. A lack of proportionality may lead to wage claims. It is advisable to review the applicable calculation criteria annually.
Not all absences can be penalized
One of the issues that generates the most conflict is the use of absenteeism as a factor in adjusting variable compensation. Although a company may establish mechanisms to control absenteeism, not all absences can be treated the same way. Certain situations are subject to enhanced protection and should not result in negative financial consequences for the employee.
Absences resulting from temporary disability, as well as those related to work-life balance and family care rights, require particularly careful analysis. Case law has consistently warned that improper handling of these situations can lead to discrimination.
Medical leaves cannot always be counted toward reducing incentives. Leave related to work-life balance requires special protection. Generic clauses regarding absenteeism should undergo legal review.
Work-Life Balance and Equality: Increasingly Important Issues
Current regulations provide growing protection for the right to achieve a balance between family and work life.
For this reason, compensation policies must also be analyzed from the perspective of equality and non-discrimination. A system that appears neutral may have adverse effects on certain groups and ultimately be challenged in court.
It should not be forgotten that discrimination can be both direct and indirect. At times, certain internal rules end up harming employees who exercise legally protected rights, even if that was not the company’s initial intention.
Avoiding Double Penalties
Another particularly sensitive issue is ensuring that the same negative circumstance is not counted twice.
For example, if the company already adjusts the incentive based on actual hours worked, applying a second, additional reduction for that same absence could be disproportionate.
The accumulation of penalties significantly increases the risk of conflict and may call into question the validity of the incentive system. It is precisely this issue that was recently analyzed by the Supreme Court in a ruling that declared a specific variable compensation system to be unlawful.
Counting the same absence twice must be avoided. Excessively complex systems tend to generate more litigation. Transparency in the calculation of bonuses is essential.
The company cannot automatically reduce the bonus or variable compensation simply because the employee was on sick leave. The Supreme Court notes that absences due to illness cannot be counted as absenteeism to penalize variable compensation when doing so constitutes discriminatory treatment. In such cases, reducing the incentive because an employee was on sick leave may violate the prohibition against discrimination set forth in Law 15/2022 and Article 14 of the Constitution.
Has it been years since you last reviewed your bonus policy?
Many companies continue to use incentive systems designed years ago, without having adapted them to regulatory changes or evolving case law. However, the current legal framework requires that these policies be reviewed periodically to ensure they remain valid and comply with requirements regarding equality, work-life balance, and non-discrimination.
If your company has variable compensation systems linked to objectives, attendance, productivity, or absenteeism, it is advisable to conduct a comprehensive legal review of their design and operation.
For more information, please contact our Labor Advisory Service.
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