The Supreme Court has recently ruled that determining and paying a business performance bonus (commonly referred to in practice as the “Christmas bonus” or “13th salary”) based on the criteria of an employee’s (non)attendance at work due to personal circumstances (in that specific case, due to sick leave) constitutes discrimination. As the time to pay out the Christmas bonus nears, read on to learn about the consequences of this ruling.
We have previously written extensively about the conditions for paying a business performance bonus (e.g., “(Non)discriminatory Conditions for Paying a Business Performance Bonus“). In this context, we also commented on the position of the Advocate of the Principle of Equality, who argued that using attendance at work as a criterion for paying the Christmas bonus is problematic (even unacceptable), as it would constitute indirect discrimination.
The Supreme Court of the Republic of Slovenia recently ruled on this issue, answering the key point raised on appeal: »Is it justified to reduce the business performance bonus payment due to the employee’s illness-related absence?« On August 20, 2024, the Supreme Court of the Republic of Slovenia granted the appeal in the decision VIII Ips 9/2024, annulled the judgment of the Higher Labour and Social Court in Ljubljana, and remitted the case for retrial. In its judgment Pdp 250/2023 dated September 19, 2023, the Higher Court unjustifiably rejected the plaintiff’s claim for payment of part of the business performance bonus, which the employer withheld due to her several months-long sick leave.
Let us first look at the reasoning of the Higher Court.
The Higher Court largely justified the rejection of the plaintiff’s claim by referencing the distinction between salary and salary compensation. It argued that the business performance payment is an integral part of the salary and that employees are entitled to salary only for periods during which they are actively working. For periods during which they are absent from work for justifiable reasons, they are entitled to salary compensation. Therefore, the employer’s decision to withhold part of the business performance payment for the time the employee was absent from work (regardless of the reason for the absence) should not be considered illegal.
The Higher Court also referenced judgment VIII Ips 206/2018 of October 8, 2019 of the Supreme Court of the Republic of Slovenia, which stated that the obligation to pay salary is not an automatic consequence of the existence of an employment relationship, but rather a payment for work done. In its revision decision, the Supreme Court clarified that the Higher Court’s reliance on this decision was unfounded. The dispute in case VIII Ips 206/2018, in fact, did not involve absence due to illness, but rather unjustified absence from work. In the cited case, the Supreme Court ruled that the employer was not required to pay the employee’s salary[1] when the employee was unjustifiably absent from work.
Reasoning of the Supreme Court of the Republic of Slovenia.
In its revision decision on August 20, 2024, the Supreme Court of the Republic of Slovenia adopted a position contrary to that of the Higher Court. The Supreme Court primarily found it unlawful that the employer’s collective agreement explicitly stipulated[2] that the employee’s sick leave days would proportionally reduce the entitlement to part of the business performance bonus. As emphasised by the Supreme Court, such a provision is directly discriminatory and, as such, unlawful. It further pointed out that, under such a regulation, the entitlement to part of the business performance bonus is not tied to the number of days worked (regardless of the reason for the absence). Instead, it limits the rights of a specific group of employees who are absent due to personal circumstances (health conditions).
The reasoning of the Supreme Court in this regard is difficult to challenge, as it correctly highlights that the disputed provision was directly discriminatory.
At the same time, the Supreme Court explicitly pointed out that it is not generally unacceptable to consider the number of days worked when determining the criteria for granting and the amount of the business performance bonus. However, the use of this criterion must not be discriminatory. In this part of the revision decision, the Court did not concur with the position of the Advocate of the Principle of Equality, who argues that such a criterion is inherently discriminatory and, thus, unlawful.
Based on the reasoning discussed, it appears that, in our opinion, a definitive answer has not been given to the question of whether it would be permissible for an employer to consider factors such as the number of days worked (or absent from work), or the number of working hours, regardless of the reasons behind employees performing a reduced amount of work in a given year. Even with such a criterion, employees who were absent for extended periods due to sick leave, parental leave, etc., would receive a lower business performance bonus. The issue of indirect discrimination could also arise when considering absences due to annual leave, as the entitlement to additional leave days is often linked to personal circumstances (such as age, parenthood, disability, education, etc.). If such a criterion (i.e., mere absence / attendance at work) were deemed inadmissible, even though it is not directly discriminatory, employers would have very limited options in practice to link the recognition and amount of the business performance bonus to the employee’s attendance at work.
We must also be somewhat critical of the reasoning provided by the Supreme Court of the Republic of Slovenia, where the Court argues that an individual’s contribution to the employer’s successful business operations is actually irrelevant when paying part of the business performance bonus. The reasoning suggests that the payment is intended (solely) for (individual) work performance. It should therefore be irrelevant whether the employee was present at work or not during the relevant period.
In this regard, the decision of the Higher Court seems far more convincing, as it correctly pointed out that the business performance bonus is an integral part of the salary, directly tied to work performance and rewards. For these reasons, we believe that the criterion of attendance at work (regardless of the reasons for absence) should be permissible. While it is true that measuring an individual’s contribution to overall business success is difficult, it is equally true that an individual can only contribute to or strive for that success when they are actively performing work.
Even though the business performance payment is tied to the overall success of the company and, by nature, is far less individualised than the part of the salary related to work performance, it remains fundamentally part of the salary. It is intended to reward the work performed and is not a payment that the employee is entitled to solely because they were employed during the relevant period (as is the case, for example, with the entitlement to holiday pay).
If practices in this area were to further develop in the future such that the business performance portion of the salary becomes a kind of equalised payment (a system still favoured in Slovenia due to its simplicity and tendency to generate less envy and dissatisfaction within teams), it could lead to the loss of an opportunity to reward performance. In this case, the business performance portion of the salary would likely become just another way to increase the income of all employees (equally) in a tax-efficient manner, similar to how holiday pay and commuting allowances up to EUR 140 are handled.
In discussions about discrimination, it will also be necessary to question whether it is fair —and even legal—for employees who perform varying amounts of work and contribute differently to the company’s success to receive the same payment. Social security for employees is intended to be provided by other instruments. For payment for work – at least for the part of the salary tied to performance – it should remain a means of compensating employees for the work they’ve done and reward those who are exceptionally burdened or successful in their roles. Even the public sector is expected to pay more heed to this issue as part of the ongoing pay reforms, making it illogical for the private sector to move in the opposite direction.
Authors: Jernej Jeraj, Partner and Attorney at Law, Eva Bardutzky, Junior Associate
[1] In the relevant decision, only the entitlement to net salary was explicitly addressed, as the employer had already paid the taxes and contributions. We, however, do not see a basis for the employer to pay taxes and contributions for the employee in these cases, as Slovenia follows the principle of gross salary. Under this system, the employer pays the taxes and contributions on the salary on behalf of the employee, and then also pays contributions for its own account on the actual salary.
[2] This was not an employer by-law or a unilateral regulation of the right by the employer – in those cases the assessment of the permissibility of conditions and criteria is even stricter than with collective agreements.
