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Stay on bonus is now a possibility

Stay on bonus is now a possibility

The Danish Supreme Court has recently approved retention bonus to a salaried employee. The Supreme Court ruled that the particular retention bonus was not comprised by Section 17A of the Danish Salaried Employees Act. Therefore, the employee, who resigned before the agreed date, was not entitled to a proportionate part of the retention bonus. The Supreme Court’s ruling overrules previous Danish court cases.

The employee was offered a retention bonus in connection with a merger between four energy traders where the employees’ assignments were to be transferred. It was important for the employer to keep the employee until the transfer.

The employee was offered a retention bonus if the employee was still employed at a specific date. However, the employee resigned before the specified date. The employee demanded a proportionate share of the retention bonus.

The Supreme Court ruled that the particular retention bonus was not comprised by Section 17 A of the Danish Salaried Employees Act which would otherwise entitle the employee to a proportionate share. The Supreme Court stressed that the employee was already paid in accordance with the existing collective agreements and that the retention bonus was given as a supplement. The Court also stressed the bonus was not subject to the employee’s or the company’s performance. Finally, it was stressed that it was special situation where it was very important to the company that the employee stayed until the specified date.

The Supreme Court ruled that the bonus was not payment for work. Therefore, the retention bonus was not comprised by Section 17A of the said Act.

The ruling shows that it is possible to offer a retention bonus or stay-on bonus to salaried employees in special situations and circumstances to the effect that no payment shall be made if the employee resigns before the specified date. However, it requires a special situation and the retention bonus can not be subject to anything else but the actual employment.

You are most welcome to contact us for any further queries and you may contact our senior associate, attorney-at-law Mrs. Anja Bülow Jensen

Anja Bülow Jensen

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