Changes to the remuneration scheme: when does the works council have a right of consent?

Introduction

We are regularly asked whether the works council’s (WoCo) consent is required for changes to a remuneration scheme. In international companies, this question is sometimes even more complex if the bonus policy is determined at group level and must be implemented at national level. A ruling by the Rotterdam Subdistrict Court from late 2025 provides useful guidance.

This case concerns the amendment of an annual performance-related salary increase (Merit Increase) and two bonus schemes (SIP and AEIP). Due to a decline in turnover, the US parent company decided not to allocate a budget for salary increases for 2024. To compensate for this, the salary increase for 2025 was brought forward by three months. As regards the bonus schemes: the SIP (the bonus scheme for sales staff) has been amended in such a way that better performance by employees is required to achieve the same level of remuneration. And in the AEIP (the bonus scheme for non-sales staff), the target threshold has been raised, thereby reducing the likelihood of receiving a payment.

According to the WoCo, consent should have been sought. As this did not happen, the WoCo considered the decisions to be null and void and therefore not to be implemented. The Rotterdam Subdistrict Court rejected the Works Council’s requests.

When does a remuneration system apply?

Under the Dutch Works Councils Act (Wet op de Ondernemingsraden), an employer requires the consent of their works council for any intended decision to introduce, amend or withdraw a remuneration system, insofar as the decision relates to all or a group of persons employed by the company. In this case, the subdistrict court assessed whether such an amendment to a remuneration system had taken place. Incidentally, the subdistrict court assumed, without further motivation, that the decisions of the US parent company could be attributed to the Dutch company.

With regard to the performance-related salary increase, the subdistrict court considered that the WoCo had no right of consent, as the decision to forgo the salary increase for 2024 was not intended to alter the remuneration system. Furthermore, the remuneration system as such was not altered and the annual salary increase related to a primary term of employment that does not fall within the scope of the right of consent.

With regard to the amendment of the SIP and AEIP, the subdistrict court also ruled that the WoCo’s consent was not required for this. The main reason was that, although the decision regarding both bonus schemes would have consequences for the amount of the bonus and/or the method of calculating it, it had no consequences for the relative ranking of remuneration within the group of employees concerned. In this regard, the subdistrict court referred to the legislative history, in which the remuneration system is defined as:

A system according to which remuneration is awarded; it relates to the relative ranking of remuneration (for example, through classification into pay groups or pay scales). Commission schemes and performance-related pay schemes generally do relate to the level of remuneration, and therefore fall under the primary terms and conditions of employment and are thus not subject to the works council’s right of consent.

For both schemes it had not been shown that the employer had intended to alter the relative ranking. With regard to the SIP, the subdistrict court considered that the group eligible for the bonus scheme had not changed, whilst the revised targets were achievable.

Practical lessons for employers

Practical lessons can be drawn from this ruling:

1. Attribution: for a right of consent to apply, there must be an intended decision by the company. If the decision was taken by a (foreign) parent company, the WoCo does not, in principle, have a right of consent, unless this decision can be attributed to the company (or in the case of joint entrepreneurship, medeondernemerschap). Attribution applies if the decision of the (grand)parent company directly affects the company for which the WoCo was established and if the director is involved in some way in the decision-making initiated by the (grand)parent company. It is therefore important to take this doctrine of attribution into account and to bear in mind that the WoCo may have codetermination rights even if the decision is taken by a (foreign) parent company.

2. Remuneration system: in practice, it is often difficult to distinguish between a change to a remuneration system and a change relating to the level of remuneration. If the change primarily concerns the level of remuneration, the WoCo has no right of consent, as this then relates to a primary term of employment. The legislator has reserved consultation on this matter for the trade unions. An important factor in assessing whether there is a change to a remuneration system is whether the relative ranking of remuneration within the group of employees concerned is altered. This is once again evident from this ruling by the Rotterdam Subdistrict Court.

3. Purpose of the change: case law indicates that the decision must be intended to change a remuneration system. The fact that the decision merely affects a remuneration system is insufficient to assume a right of consent.

Conclusion

The ruling shows that the WoCo does not have a right of consent in respect of every change to a bonus scheme or other remuneration scheme. It must involve a change to the remuneration system. Of course, a tailor-made approach remains necessary in practice. Our employment law team advises national and international employers on changes to remuneration policy, bonus schemes and codetermination processes.

Would you like us to assess whether an intended change requires consent, or do you need advice on the further codetermination process? We would be happy to assist.