Discretionary Bonus? Employers Do Not Have Complete Freedom

Midden-Nederland District Court, June 17, 2026, ECLI:NL:RBMNE:2026:3744. Calling a bonus scheme “discretionary” does not mean that, as an employer, you are completely free to decide whether or not to pay it out. An employer who decided not to grant an employee a contractual year-end bonus learned this the hard way.

Discretionary, but not without obligation

The employment contract stated that the employee would receive a discretionary year-end bonus equal to one month’s salary at the end of the calendar year. The amount would be determined based on, among other things, annual revenue, the employee’s commitment, and the quality of their work.

When the employee indicated that he did not wish to renew his temporary employment contract, the employer decided not to pay the year-end bonus. According to the employer, the employee’s performance had been lacking, his development required more time and guidance than expected, and his salary was not commensurate with his performance.

Good employment practices remain paramount

The subdistrict court did not agree. While an employer may reserve the right to exercise discretion, that authority is not unlimited: even when exercising it, the employer must act as a good employer. Furthermore, the performance reviews did not indicate that the employee was underperforming. On the contrary: they stated, among other things, that his performance was on par with that of other analysts and that he had made significant progress. The employer had even initially planned to renew his employment contract.

Insufficiently justified

Another factor was that the employer had not sufficiently justified its decision. The employee was merely informed in December that he would not receive an end-of-year bonus; a substantive explanation followed only after his employment contract had already ended. According to the labor court judge, the failure to pay the bonus was therefore contrary to the principles of good employment practices. The employer was ordered to pay the end-of-year bonus of €3,727.20 gross retroactively.

The lesson

In short: a discretionary bonus is not entirely at the employer’s discretion. Even with such a bonus, an employer may be expected to apply clear criteria and carefully justify any decision not to pay it. After all, the exercise of that discretionary authority must not conflict with the principles of good employment practices.

The common thread in this issue is clear: acting with due care, implementing consistent policies, and properly substantiating decisions can prevent many problems—whether it involves summary dismissal, the application of internal policies, or the decision to pay or withhold a bonus.

Do you have questions about what these developments mean for your organization? Feel free to contact us.