Recent rulings of the Supreme Court have introduced significant changes in the way variable remuneration systems must be structured within companies. These are not minor adjustments or merely technical issues. Judgments STS 159/2026 of 12 February and STS 165/2026 of 17 February establish a more demanding framework in which objectivity, transparency and consistency cease to be mere recommendations and become genuine legal requirements.
Both rulings address different but interconnected issues. On the one hand, access to bonuses in situations of temporary incapacity. On the other, the scope of employer discretion in determining their amount. Taken together, they convey a clear message: incentive systems must be capable of being explained, justified and verified.
One of the most sensitive issues is addressed in STS 159/2026, which examines whether temporary incapacity may affect the right to participate in a variable remuneration scheme. For years, many companies have designed their incentive plans by introducing, more or less explicitly, requirements of continued service or minimum activity which, in practice, excluded employees who had been on sick leave. The Court rejects this approach and considers that excluding an employee from a bonus on the grounds of temporary incapacity due to common illness constitutes discrimination linked to health status, contrary to Act 15/2022.
The consequences are significant: health status cannot be used as a “gateway” to access an incentive. Employees must be able to participate in variable remuneration systems even if they have undergone periods of sick leave. This criterion requires a review of many models which, without expressly stating so, conditioned access to bonuses on the absence of incidents during the accrual period.
However, the judgment does not eliminate any impact of temporary incapacity on the incentive. The Court introduces an important nuance which, if properly understood, allows for the design of balanced systems. It is permissible to adjust the amount of the bonus in proportion to the time actually worked. This possibility is grounded in the logic of the Workers’ Statute, which provides for the suspension of reciprocal obligations—including remuneration—during periods of temporary incapacity.
That said, such adjustment cannot be made automatically or in a misaligned manner. If working time is reduced, targets must also be adjusted accordingly. Requiring the full achievement of objectives designed for a complete period from an employee who has not worked that entire period would clearly result in an unfair situation. Therefore, proportionality must operate in both directions: in the calculation of the bonus and in the definition of the objectives.
A few days later, STS 165/2026 addresses a different but equally relevant issue: the extent to which an employer may modulate bonuses on the basis of individual assessments. The case concerned a system in which, once certain collective targets had been achieved, managers could adjust the amount of the incentive based on qualitative criteria linked to performance.
This model is widespread in business practice. However, the Supreme Court considers that the issue does not lie in the existence of an evaluation itself, but in the absence of criteria allowing such evaluation to be controlled. Where rules are vague, concepts are indeterminate, and the final decision depends excessively on the judgment of the hierarchical superior, the system enters a zone of legal risk. In this case, that risk resulted in the nullity of the clause allowing adjustment of the bonus.
The judgment emphasises that it is not admissible to leave the determination of an incentive to the employer’s unfettered discretion. It is not sufficient to assert that an evaluation or assessment exists; the criteria must be defined in advance and must allow verification of the decision taken. Otherwise, the boundary between legitimate managerial discretion and arbitrariness becomes blurred.
Perhaps the most striking aspect of this ruling is its impact on performance evaluations. Traditionally, it had been understood that such systems could incorporate subjective elements, provided they were neither discriminatory nor arbitrary. However, the Court states that qualitative criteria based on performance assessments, where not sufficiently objectified, fall within the realm of “pure subjectivity”. This statement raises the level of scrutiny and compels a reconsideration of many models that combine quantitative objectives with loosely defined qualitative assessments.
The scope of this doctrine may be particularly significant when projected onto business reality beyond formalised systems. In many organisations, especially outside large corporations, bonuses are not structured through detailed plans but are granted in a more flexible or even informal manner. In such cases, the decision as to who receives an incentive and in what amount may largely depend on managerial judgment.
In light of these rulings, such practices are placed in a delicate position. If a company cannot explain, on the basis of objective criteria, why one employee receives a bonus and another does not, the risk of disputes increases considerably. It is not merely a matter of avoiding discrimination in the strict sense, but of being able to justify differences in treatment through verifiable parameters.
Beyond their legal dimension, these rulings also connect with a fundamental organisational issue. A variable remuneration system only fulfils its function if the employee understands what is expected and what must be done to obtain the incentive. When criteria are unclear or depend on discretionary decisions, bonuses cease to be a motivational tool and may instead become a source of uncertainty or even distrust
In this sense, requiring greater objectivity not only reduces legal risks but also enhances the effectiveness of the system itself. A clear, measurable and predictable incentive allows for better alignment between employee behaviour and company objectives—something difficult to achieve when rewards depend on poorly defined factors.
In conclusion, Judgments STS 159/2026 and STS 165/2026 consolidate a trend towards more structured, transparent and coherent variable remuneration models. The scope for broad discretion is reduced, and in its place emerges the need to design systems that can be explained, justified and upheld from a legal standpoint.
