Switzerland: Swiss Supreme Court Defines "Very High Remuneration" And Sets A Framework For Managers' Remuneration

Last Updated: 27 October 2015
Article by Oliver Kaufmann and Vibeke Jaggi


In a recent noteworthy decision, the Swiss Supreme Court (the "Supreme Court") has ruled that a remuneration which exceeds five times the Swiss median salary is considered as a "very high remuneration" and as such does not deserve the protection generally granted by Swiss employment legislation.


The plaintiff (the "Employee") was a managing director of a large Swiss bank (the "Bank"). In mid 2009, he resigned from his position to join another financial establishment. At the time of his resignation, the Employee's remuneration was composed of a fixed annual base salary of CHF 300,000 (USD 310K approx.) with a two-fold bonus incentive scheme composed of Incentive Share Units (ISU) and a Cash Retention Award (CRA). The bonus incentive scheme provided for a claw back clause (the "Claw Back Clause") entitling the Bank to claw back pro rata the cash bonus (CRA) if the Employee were to resign (the "Clawback Event") within a two year period as of January 2009 (the "Claw Back Period").

At the end of February 2009, the Employee received a bonus payment of CHF 501,719 (USD 520K approx.) in the form of shares (ISU) and a cash bonus payment (CRA) of CHF 848,242 (USD 880K approx.). With the payment, the Bank emphasized that the bonus was paid at the Bank's sole discretion.

At the beginning of March 2009, i.e., a few days after the bonus payment, the Employee notified the Bank that he was resigning from his job, effective at the end of June 2009. The Bank released the Employee from his obligation to work and informed him of his contractual (pro rata) repayment obligation amounting to CHF 636,210.95 (USD 660K approx.) (due to the triggering of the Clawback Event). As the Employee failed to comply with the request for repayment, the Bank exercised the right of set off by debiting the amount of CHF 636,210.95 (USD 660K approx.) from the Employee's account held at the Bank.

The Employee brought an action before the local court claiming, inter alia, the payment of CHF 636,210.95 (USD 660K approx.) representing the amount set off by the Bank. The Employee argued that the bonus (the "Disputed Bonus") should be considered and treated as salary (as opposed to a gratuity) and that, as such, it was not "recoverable" by the Bank. The lower court found that the Disputed Bonus actually qualified as a variable salary and as such was due and payable. On appeal lodged by the Bank, the Appellate Court partially reversed the lower court's decision: it ruled that contractual freedom prevails with respect to the portion of annual remuneration beyond CHF 500,000 (USD 518K approx.), in the meaning that the employer is free to grant a gratuity (payable under certain conditions) for that portion without running the risk to see the gratuity requalified as salary.

The Bank appealed to the Swiss Supreme Court which overruled the Appellate Court's decision.

The Supreme Court's decision

The main question at issue was whether the Disputed Bonus qualified as part of the salary due to the employee (the employee's position) or, in contrast, as a gratuity (employer's position).

The Supreme Court began by stating that Swiss law does not contain any legal provision defining bonus. Whether bonus qualifies as salary or as a (discretionary) gratuity is crucial because the gratuity regime is substantially more flexible than the regime applicable to salary.

The Supreme Court continued its analysis by saying that the first point to clarify is to establish whether a bonus is determined or determinable (which is the case when the remuneration does no longer depend on the employer's assessment). If so, the bonus qualifies as a variable salary component and the employee is entitled thereto. In contrast, if the bonus is not determined (or not objectively determinable), then the bonus qualifies, in principle, as a gratuity and as such, it is at the employer's discretion.

Yet, the Supreme Court went on, this principle suffers exceptions: according to case law, if an undetermined bonus is substantial compared to the annual salary – equivalent to or even higher than the annual salary –, and has been paid regularly, then it qualifies as a (variable) salary even though the employer has reserved its discretionary character. Indeed, to qualify as a (discretionary) gratuity, the bonus must be secondary to the salary (the so-called "secondary criterion").

Referring to recent case law, the Supreme Court further explained that no such exception applies if the employee receives a very high remuneration. In such case, the (undetermined) bonus always qualifies as gratuity.

The Supreme Court then turned to the definition of "very high remuneration". First, it set out the following principles:

  • the threshold of a "very high remuneration" must be fixed with due consideration to the employee's total annual remuneration (base salary and bonus) in the relevant year;
  • if said total remuneration exceeds the threshold of a "very high salary", then the undetermined bonus always qualifies as a gratuity. In that situation, there is no place for a requalification of the bonus into salary (the "secondary criterion" does not apply);

Having set out these principles, the Supreme Court ruled that a "very high remuneration" is adequately defined as being a remuneration which exceeds five times the Swiss median salary (all industries in the private sector included). When the employee receives such "very high remuneration", then the bonus qualifies as a gratuity, at the discretion of the employer. In its reasoning, the Supreme Court stressed that when an employee receives a "very high remuneration", there is no need to grant any protection by restricting the parties' contractual freedom.

In the case at issue, the Employee's total remuneration exceeded the threshold set for a "very high salary".  Consequently, the Supreme Court held that the Disputed Bonus qualified as a discretionary gratuity and that the Claw Back Clause was admissible.


The decision of the Supreme Court adds to recent case law, establishing that beyond a certain level of remuneration, contractual freedom prevails over the employee's need for protection as traditionally granted by employment legislation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions