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Bonus Agreement

Bonus Agreement Template for Denmark

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Bonus Agreement

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Document background
The Bonus Agreement serves as a crucial document in Danish employment relationships where variable compensation forms part of the total remuneration package. This document is typically implemented when companies wish to establish performance-based incentives for employees, align individual goals with organizational objectives, or create structured reward systems. The agreement must comply with Danish employment law, including the Salaried Employees Act (Funktionærloven) and Equal Treatment Act (Ligebehandlingsloven), while providing clear terms for bonus calculations, payment schedules, and eligibility criteria. It is particularly relevant for new hires, during compensation reviews, or when implementing company-wide incentive schemes. The Bonus Agreement should be carefully drafted to ensure transparency, fairness, and legal compliance while maintaining flexibility for business needs.
Suggested Sections

1. Parties: Identification of the employer company and the employee

2. Background: Context of the bonus agreement and its relationship to the employment contract

3. Definitions: Clear definitions of key terms used in the agreement, including types of bonuses, performance metrics, and calculation periods

4. Bonus Structure: Detailed explanation of the bonus scheme, including types of bonuses offered

5. Performance Criteria: Specific metrics and targets that determine bonus eligibility and amounts

6. Calculation Method: Formula and methodology for calculating bonus payments

7. Payment Terms: Timing and method of bonus payments, including any deferral arrangements

8. Eligibility Criteria: Conditions that must be met to qualify for bonus payments

9. Term and Termination: Duration of the bonus agreement and implications of employment termination

10. Clawback Provisions: Circumstances under which the company may reclaim paid bonuses

11. Confidentiality: Requirements regarding confidentiality of bonus terms and calculations

12. Governing Law: Confirmation of Danish law application and jurisdiction

Optional Sections

1. Tax Treatment: Specific provisions regarding tax handling of bonus payments, used when special tax arrangements apply

2. Stock Options: Include when bonus includes or is linked to stock options or share schemes

3. International Aspects: Required for employees working across multiple jurisdictions

4. Group Company Provisions: Include when bonus is linked to group company performance or involves multiple entities

5. Good/Bad Leaver Provisions: Detailed provisions for bonus treatment under different departure scenarios

6. Change of Control: Include when specific provisions apply in case of company ownership changes

7. Discretionary Adjustments: Framework for management discretion in adjusting bonus calculations, if applicable

8. Holiday Pay Impact: Specific provisions about how bonus payments affect holiday pay calculations

Suggested Schedules

1. Bonus Calculation Examples: Detailed examples showing how different bonus scenarios are calculated

2. Performance Metrics Definition: Detailed description of each performance metric and measurement methodology

3. Target Setting Process: Process and timeline for setting and reviewing performance targets

4. Bonus Payment Schedule: Timeline of measurement periods and corresponding payment dates

5. Historical Data Reference: Reference data used for relative performance measurements, if applicable

6. Corporate KPIs: Details of company KPIs relevant to bonus calculations

Authors

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Relevant legal definitions
Agreement
Base Salary
Board
Bonus
Bonus Period
Bonus Year
Business Day
Cause
Company
Confidential Information
Control
Disability
Effective Date
Eligible Employee
Employee
Employment Agreement
Financial Year
Good Leaver
Bad Leaver
Group
Group Company
KPIs
Management
Material Breach
Maximum Bonus
Measurement Period
Notice Period
Parent Company
Performance Criteria
Performance Targets
Pro-rata Calculation
Qualifying Event
Reference Salary
Retirement
Target Bonus
Termination Date
Threshold Performance
Variable Pay
Vesting Date
Vesting Period
Works Council
Relevant Industries
Relevant Teams
Relevant Roles
Industries
Danish Contracts Act (Aftaleloven): Fundamental law governing contract formation and validity in Denmark, essential for ensuring the bonus agreement meets basic contractual requirements
Danish Salaried Employees Act (Funktionærloven): Regulates employment relationships for salaried employees, including provisions on remuneration and benefits
Danish Equal Treatment Act (Ligebehandlingsloven): Ensures non-discrimination in employment terms, including bonus schemes, regardless of gender, age, or other protected characteristics
Danish Holiday Act (Ferieloven): Relevant for calculating holiday allowance and determining if/how bonuses affect holiday pay
Danish Act on Employment Certificates (Ansættelsesbevisloven): Requires essential employment terms, including remuneration and bonus schemes, to be clearly stated in writing
Danish Data Protection Act (Databeskyttelsesloven): Regulates the processing of personal data, including performance metrics used for bonus calculations
Danish Stock Options Act (Aktieoptionsloven): Relevant if the bonus includes stock options or is linked to company shares
Danish Act on Part-Time Work (Deltidsloven): Ensures proportional treatment of part-time employees in relation to bonus schemes
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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