Reduction of incentive payments during temporary disability: limits established by the Supreme Court Judgment of 16 January 2026
The linking of variable remuneration to the achievement of targets or to effective attendance has traditionally been used as a tool to incentivise productivity and reduce workplace absenteeism arising from causes such as temporary disability for work.
On the basis that combating absenteeism constitutes a legitimate aim of employment policy — as stated by the Court of Justice of the European Union in its judgment of 18 January 2018 (Case C-270/16) — it has, until recently, been common practice in many companies to make the accrual of incentives and bonuses conditional upon effective presence at work, following a straightforward rationale: in the absence of the effective provision of services, no entitlement to variable remuneration arises.
Within the framework of Act 15/2022 on equal treatment and non-discrimination, which expressly recognises illness as a protected ground, the principle of equality also extends to the design and implementation of incentive and bonus schemes, including the common practice of making their accrual conditional upon effective attendance.
This interpretative approach has been reinforced by the judgment of the Supreme Court of 16 January 2026, which establishes an important principle: it is not permissible to introduce automatic mechanisms for the reduction or exclusion of variable remuneration where the absence arises from a situation of temporary incapacity for work or from the exercise of legally protected leave.
This does not preclude linking variable remuneration to performance or productivity; however, it does require that any measures adopted be objectively justified and proportionate. Recent case law, further reinforced by judgments of the Spanish National High Court, therefore necessitates a review of certain contractual provisions at company level and, in some cases, of collectively agreed clauses.
1. Temporary disability as a limit on the reduction of incentive payments
The Supreme Court confirms that temporary disability due to illness or accident cannot, in itself, justify the loss or reduction of the right to receive incentive payments. The same reasoning extends to certain forms of legally protected leave — such as those provided for in Article 37.3 of the Workers’ Statute — which likewise cannot operate as an automatic ground for exclusion.
The judgment of 16 January examines a salary supplement linked to productive working days, under which periods of temporary disability and certain forms of paid leave were excluded from the calculation. The Supreme Court concludes that, although the employer’s objective may be legitimate, the measure fails to satisfy the test of proportionality insofar as it entails unfavourable treatment directly connected to illness.
The debate is no longer confined solely to the sphere of contractual agreement or organisational autonomy, but now directly engages the domain of fundamental rights.
2. The principle of equality and the proportionality test in variable remuneration schemes
While Act 15/2022 initially had a particular impact in the field of dismissal, case law is now extending its scope to the design of remuneration policies.
Until now, incentive or variable pay structures requiring 100% attendance in order for a bonus to accrue, or applying automatic formulae deducting any absence irrespective of its cause — whether justified or unjustified — have been commonplace. Similarly, schemes have been implemented whereby, once certain production thresholds are met, the incentive is apportioned according to the number of days actually worked, with all absences excluded from the calculation.
In light of the current line of authority, such automatic mechanisms may be contrary to the principle of equality where they introduce unfavourable treatment directly linked to illness. This may give rise to individual claims for payment, collective challenges, the nullity of remuneration clauses and even additional compensation for infringement of fundamental rights, particularly where variable remuneration represents a significant component of the overall salary structure.
3. Impact of recent case law on collectively agreed clauses
The judgment of the Spanish National High Court of 26 January 2026 reinforces this interpretative approach.
In that judgment, the Spanish National High Court declares the partial nullity of Article 48 of the State Collective Agreement for Travel Agencies, which sought to reduce absenteeism through two mechanisms: first, by limiting to four days the 50% salary supplement in cases of justified illness not accompanied by medical certification of sick leave; and secondly, by excluding from the temporary incapacity supplement those employees whose annual absenteeism exceeded 5%, calculating within that percentage absences due to common contingencies.
The Spanish National High Court held that both measures introduced treatment that was directly unfavourable on grounds of illness. It also found that the arrangement gave rise to a form of associative discrimination, since the calculation of absenteeism was based on overall workforce data, thereby potentially disadvantaging an individual employee as a result of the medical absences of others.
The ruling confirms that collectively agreed regulation is likewise not exempt from scrutiny under the principle of equality and non-discrimination.
4. Review of remuneration policies in light of the principle of non-discrimination
Recent case law does not render incentive schemes linked to productivity invalid as a general rule; however, it does require that their structure withstand objective justification and a proportionality assessment.
In its judgment, the Supreme Court itself acknowledges the validity of collective agreements in regulating productivity and introducing incentive schemes, as well as the margin of discretion afforded to employers and bargaining parties. However, this discretion is now subject to enhanced scrutiny, requiring that the system be carefully assessed and that it does not incorporate automatic mechanisms giving rise to unfavourable treatment directly linked to illness or to the exercise of legally recognised rights. An incentive genuinely linked to actual performance may be defensible; an automatic reduction solely on the ground that the employee is on temporary incapacity leave or exercising legally protected leave will not.
In this context, the review of remuneration policies requires an assessment of the purpose of the incentive, proper documentation of the criteria applied, and verification of their consistency with the principle of equal treatment.
5. Practical scope of the Supreme Court’s doctrine on salary incentives
The Supreme Court judgment of 16 January 2026 establishes an important principle in the structuring of variable remuneration: absences arising from temporary incapacity or from the exercise of statutorily recognised leave may not operate as automatic grounds for reduction or exclusion in the calculation of incentives.
A careful assessment of the impact of variable remuneration clauses on situations of temporary incapacity and statutorily recognised leave, the avoidance of automatic mechanisms operating as grounds for reduction or exclusion, and the robust documentation of the purpose and proportionality of the incentive are essential measures to ensure the system’s compatibility with the principles of equality and non-discrimination, as well as to strengthen its resilience against potential claims.
In short, the increased judicial scrutiny applied to the review of these remuneration models requires the utmost care in their design and implementation. Failing this, mechanisms that have been in place for years may give rise to individual claims and highly complex collective disputes. Accordingly, reviewing such policies with specialised legal advice becomes a strategic necessity.
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