If there is no other agreement between the two parties, the burden to take the initiative lies with the employer. The employee is under no obligation to demand the objectives from the employer or to demand a copy of the target agreement. If it is agreed in the contract that targets should be set solely by the employer, then the employer must do so. Generally, it is the employer that should formulate the target agreements and present them to the employee. Parties frequently fail to agree or set targets. Target agreement and objective before the start of the target period If the targets are not expressed in writing, there is a risk that a court of law would award the highest possible variable remuneration, because the targets were not effectively included in the employment contract. This often fails to occur because target agreements and objectives are often exchanged by email or filed – somewhere – on the intranet, e.g., as "Target Policy 2017." If a legal dispute arises regarding the level of variable compensation, the employer must be able to prove that the targets were agreed upon or given in a proper manner. Supplements to the employment contract take effect only if stated in writing, i.e., signed by both parties in the original copy. Most employment contracts contain ”boilerplate” form clauses. Written form of the target agreement and objective When the precise target to be achieved is not communicated to the employee, or the level of target achievement cannot be monitored, case law tends to recognize the targets as having been achieved. For example, it would be insufficient to set as a target objective to “increase revenue,” “improve the operational climate,” “integrate new employees” or “organize the department more economically and effectively.” Such vague and unmeasurable targets can ultimately harm the employer. In many cases, target specification is lacking, as is the objective verification of whether the target has been achieved. Specification and objective measurability of the targets Company practices also often fall behind on standards for establishing when the targets or the objectives are agreed between the parties or set by the employer. A company's common practice for defining targets often is well behind the standards set by case law. When defining the targets, it is necessary to clarify whether meeting these goals is dependent on the employee's individual performance (individual targets), the work of several employees (group targets) or the company's overall performance (company targets). The level of variable compensation upon full achievement of these targets is regularly established in the employment contract or through an employer/Works Council agreement. Littler Inclusion, Equity and Diversity PlaybookĮmployees in Germany with a bonus arrangement can claim variable compensation if they meet their agreed-upon or specified performance targets.Littler Investigation Toolkit for Employers.We’re ready for your tomorrow – because we’re built for it. Global Workplace Transformation Initiative.General Data Protection Regulation (GDPR).
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