New Supreme Court doctrine on salary incentives and variable pay

Variable pay and legal limits in the company

Variable pay continues to gain weight in companies, but its design no longer allows for margins of ambiguity. In recent months, the Supreme Court has handed down several particularly relevant judgments on incentive schemes and variable pay, defining the limits of employer discretion more precisely and strengthening the safeguards for workers.

These rulings address especially sensitive issues, such as linking the incentive to disciplinary sanctions, the use of discretionary powers in setting it, and the exclusion of periods of temporary incapacity for accrual purposes.

All of these aspects have significant practical impact in a context where variable pay carries growing weight.

Nullity of clauses in incentive plans

Of particular relevance is the Supreme Court judgment (STS) of 17 February 2026, appeal 8/2025, issued in a collective dispute concerning Caixabank's incentive plan. In it, the High Court confirms the nullity of two clauses: the one that made payment of the incentive conditional on not having been sanctioned for serious or very serious misconduct during the accrual period, and the one that allowed the hierarchical superior to reduce the amount of the incentive at their discretion.

Regarding the possibility of making the payment of incentives conditional on not having been sanctioned for serious or very serious misconduct, the Supreme Court reiterates that depriving an employee of an already-accrued salary item as a result of a disciplinary sanction constitutes a prohibited fine on wages under Article 58 of the Workers' Statute, as well as amounting to the imposition of hidden sanctions not provided for in collective bargaining. The company cannot unilaterally add negative pay consequences to the disciplinary regime established by collective agreement.

Contractual predictability and objective criteria

Regarding the possibility of discretionarily adjusting the amount of the incentive, the Chamber considers that giving the hierarchical manager the power to adjust the incentive without objective criteria infringes Article 1256 of the Civil Code and the right to predictable and transparent working conditions, by leaving the setting of pay to the employer's discretion.

Case law recalls that, when a bonus linked to objectives lacks a clear and verifiable definition, the legal risk falls on the company, which may be obliged to pay it in full, in accordance with the STS of 26 November 2025, appeal 4704/2024.

Temporary incapacity and proportional accrual of incentives

For its part, the STS of 12 February 2026, appeal 264/2024, analyses the exclusion of periods of temporary incapacity due to common illness for the purposes of accruing an annual bonus.

The Court distinguishes between clauses that penalise illness —discriminatory under Law 15/2022— and those that provide for accrual proportional to the time actually worked, which it considers lawful, provided that the objectives and performance parameters are adjusted equally proportionally.

Supreme Court doctrine on salary incentives

In this way, the Supreme Court consolidates a clear doctrine: incentive schemes are not areas of unrestricted employer discretion, but genuine pay components subject to the essential principles of Labour Law.

The prohibition of the fine on wages, the requirement of objectivity, transparency and predictability, as well as proportionality in cases of contract suspension, constitute limits that must be respected.

Employment risks of an incorrect design

It is clear that an incorrect design of the incentive system can result not only in the nullity of clauses regulating incentive schemes, but also in the emergence of collective disputes or individual litigation, the potential obligation to pay incentives that were not provided for, and the loss of control over the company's pay policy.

In this sense, a poorly designed system can end up having the opposite effect to the one intended: increasing costs without improving performance.

An opportunity to review pay policy

At Baker Tilly, we understand that this new framework should not be seen only as a limitation, but as an opportunity to professionalise incentive schemes, review their legal design and strengthen the security of the company's pay policy.