Bonuses and variable salaries: Pitfalls for pay discrimination?

 These rules will apply in future with regard to equal pay for variable remuneration components.

Bonuses and variable salaries: Pitfalls for pay discrimination?

The EU’s Pay Transparency Directive has given the issue of equal pay a legal foundation. It is important to be aware that the principle of equal pay also applies to all components of variable remuneration.

The Pay Transparency Directive and equal pay

We have already discussed the Pay Transparency Directive (EntgTranspRL) in a separate blog article (“Equal Pay: the EU Pay Transparency Directive, Part 1”).

A key aspect of the directive is the employees’ right to be paid equally for equal work or work of equal value. This is because the Pay Transparency Directive (EntgTranspRL) has created a legal basis for the principle of “equal pay for equal work”, which must be transposed into federal law by June 2026.

Equal pay also for variable remuneration?

The principle of “equal pay for equal work” will also apply to bonuses and variable salaries in future, as it covers wages, salaries, and other remuneration. The term “remuneration” also includes supplementary or variable components and, therefore, all remuneration granted in addition to the regular salary.

It is irrelevant whether employees receive this remuneration directly or indirectly and whether the remuneration is paid in cash or as benefits in kind.

Variable remuneration – Equal pay?

This illustrates that the right to “equal pay for equal work” is highly comprehensive. In detail, the right to equal pay applies the following supplementary or variable remuneration components

  • bonuses,
  • overtime compensation,
  • travel concessions,
  • housing and food allowances,
  • compensation for training and further education,
  • severance pay for layoffs,
  • statutory sickness benefits,
  • statutory compensation and company pensions.

In view of this, employers are well advised to obtain a precise overview of where pay inequality can occur – incurring corresponding sanctions!

The ECJ has already ruled that the granting of allowances can constitute a lack of transparency. This is the case if the employees do not know the criteria for the different levels of variable remuneration. To avoid this, they must be able to determine the effects of the individual allowance criteria.

Consequently, the equal pay monitoring encompasses all supplementary or variable remuneration components and they must be documented and evaluated separately. This is the only means of determining whether “equal pay for equal work” is actually being paid.

Employers need to examine the matter closely

The legal framework requires employers to closely examine the issue of equal pay in several respects.

In this context, it is fundamentally difficult to determine whether different activities are the same or of equal value.

Moreover, the exact remuneration structure has to be clarified while also ensuring that fixed and variable remuneration components are “equal”.

So there is a lot to do to achieve real equal pay in all areas.

What can we do for you?

Do you have questions about equal pay and the Pay Transparency Directive in general? Do not hesitate to contact us!

Summary of the key facts:

  • Naturally, the “equal pay” principle applies to fixed remuneration components.
  • The same principle of “equal pay for equal work” also applies to variable remuneration components such as bonuses, severance payments, etc.
  • Employers need to explicitly address this issue to avoid risking sanctions and claims from employees.