BAG: Annual bonus tied to company targets excluded from income protection

An annual bonus that partly depends on whether the company meets its own targets does not count toward the guaranteed minimum income under the German metalworking industry collective agreement. The Federal Labour Court confirmed this on 28 April 2026 (5 AZR 79/25).

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Annual bonus with company targets excluded from income protection floor

Germany’s Federal Labour Court (Bundesarbeitsgericht, BAG) ruled on 28 April 2026 that an annual bonus which partly depends on company targets does not count toward the protected minimum income under the metalworking industry collective agreement (Manteltarifvertrag, MTV) – Az. 5 AZR 79/25. The court upheld the ruling of the Baden-Württemberg Regional Labour Court (Landesarbeitsgericht, LAG) of 26 February 2025 (Az. 19 Sa 34/24). For employees in the German metal and electrical industry: once you turn 54, you gain a right to Alterssicherung – a guaranteed income floor that cannot be reduced even if your output slows with age. This floor is calculated from your monthly base pay and monthly variable components only – not from your annual bonus.

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Long-serving specialist fought to have his bonus included

The Federal Labor Court has not yet issued its reasoning. The lower court had established the following facts:

A product specialist with decades of service received a monthly base salary of just under €7,000 gross, plus an annual bonus of around €12,000. The bonus was calculated using a formula that combined his personal performance against individual targets with the company’s own results – think of it as part merit pay, part profit share. When he turned 54 and his Alterssicherung kicked in, he argued the bonus should be factored into his guaranteed income floor, which would have raised it by roughly €1,000 per month. The courts rejected this on two independent grounds: the collective agreement only counts monthly pay components toward the floor, and an annual lump-sum payment falls outside that from the outset. On top of that, part of the bonus depended on company-wide targets the employee had no control over – making it unsuitable as a personal income guarantee in any case.