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13.02.2020

Legally correct bonuses

In the February 2020 iTiesības an article by Dace Driče, senior associate of PRIMUS DERLING, dealing with bonuses and related issues, was published.

A bonus is the payment made by the employer to the employee in addition to his/ her salary for the performance results and achievements at work.

The bonus fulfils two functions:

  • motivates the employee to achieve better performance and
  • rewards the employee for his/ her outstanding performance.

The procedure for payment of bonuses in national and local authorities is regulated by the Law on Remuneration of Officials and Employees of National and Local Authorities (the Remuneration Law). In the private sector, however, the employer is free to determine the criteria and procedures for awarding and paying bonuses.

There is no legal obligation to pay bonuses to employees. It is at the employer’s discretion whether or not to implement a bonus system in a company or agency. The employee cannot require that the employer implements a bonus system.

Qualifying a defined payment as a bonus or another payment is important at the time the average earnings are calculated. If the employee is paid a bonus of EUR 200 for good performance, this amount is taken into account when calculating the average earnings.