Recent Developments Regarding Bonus Entitlement

At a time when high salaries and bonuses are subject of criticisms, the Swiss Supreme Court has clarified the conditions under which an employee may assert a right to a bonus.

1 OVERVIEW

1.1 Legal characterization of bonuses

Swiss law does not contain any provision that specifically defines and deals with the question of bonuses. Depending upon the agreement between the parties, as well as the nature and circumstances of the payment, a bonus will be legally defined either as a gratuity within the meaning of Art. 322d of the Code of Obligations (hereinafter: "CO"), or as a part of a salary within the meaning of Art. 322 to 322b CO. The legal characterization of the bonus is important, since the legal regime applicable to gratuities is much more flexible than the one applicable to the salary components, which are subject to numerous protective rules regulations.