Sick leave and temporary incapacity: how it affects variable compensation

The relationship between temporary incapacity (TI) due to illness and variable compensation has entered a new phase of legal definition following the recent Supreme Court rulings of 2026.

In a context where many companies use bonuses, performance-based incentives, or mixed compensation systems, the High Court has reinforced a key principle: illness cannot become a factor for exclusion or compensation penalty, although it may influence how the incentive is calculated proportionally.

This nuance is what is having the greatest practical impact on human resources and labor relations departments.

Can temporary incapacity exclude access to bonuses?

One of the clearest principles established by recent case law is that it is not valid to automatically exclude an employee from the right to receive variable compensation simply because they have been on temporary incapacity.

This includes:

• Common illness.
• Temporary incapacity processes resulting from accidents.
• Protected situations linked to leave under Article 37.3 of the Workers’ Statute.

The Supreme Court considers that such clauses may constitute discrimination on the grounds of health, especially following the entry into force of Law 15/2022 on equal treatment and non-discrimination.

Consequently, companies cannot design incentive systems based on “presence” or “absenteeism” when the latter includes protected situations.

Is proportionality of variable compensation based on time worked possible?

However, the Supreme Court doctrine introduces a second equally relevant idea: proportionality in the accrual of incentives is valid, provided it is properly designed.

In other words:

• Variable compensation may be reduced based on the actual time worked.
• The suspension of the contract due to TI generally implies the suspension of salary accrual.
• However, this reduction must be applied consistently with the established objectives.

The key element is that performance objectives or parameters must also be adjusted proportionally to the actual working period, thus preventing the employee from being disadvantaged due to a protected circumstance.

The limit: not penalizing illness under the guise of “attendance”

The most sensitive point of the doctrine lies in the distinction between the following clauses:

• Clauses granting access to incentives based on attendance or presence.
• Clauses for proportional calculation of already accrued incentives.

What is not allowed

The Supreme Court has declared unlawful those formulas that:

• Exclude periods of temporary incapacity due to common illness from the calculation,
• Reduce the right to a bonus based on protected absences,
• Establish minimum “presence” thresholds that indirectly penalize illness.

What is allowed

On the other hand, the following systems are considered valid:

• Calculating bonuses based on actual time worked.
• Adjusting objectives and results proportionally.
• Not introducing elements of direct or indirect discrimination.

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Which types of absences cannot reduce variable compensation?

A key practical rule derived from recent case law is as follows:

The following cannot be used to reduce or exclude variable compensation:

• Temporary incapacity due to common illness or non-work-related accident.
• Temporary incapacity due to occupational contingencies.
• Paid leave protected under Article 37.3 of the Workers’ Statute.
• Leave related to work-life balance (birth, breastfeeding, etc.).
• Other situations protected under equality or work-life balance regulations.

Conversely, the following may have an impact (always with legal caution):

• Unjustified absences.
• Certain leaves not expressly protected.

Implications for companies

The conclusion of this new legal framework is clear: variable compensation systems must be reviewed with a strengthened compliance approach.

In particular, it is advisable to assess whether current plans:

• Use “attendance” or “presence” as a requirement for access.
• Exclude periods of temporary incapacity from the calculation of incentives.
• Do not proportionally adjust objectives and results.
• Introduce excessive discretion in bonus allocation.

A lack of precision in these elements may result in the nullity of clauses and even discrimination risks.

A doctrine in constant evolution

The Supreme Court continues to refine the limits between business freedom in designing incentives and the protection of fundamental rights.

Although the trend is clear, there are still significant uncertainties regarding how to apply these criteria in complex plans (mixed bonuses, collective objectives, or discretionary systems), so it is likely that case law will continue to evolve in the coming years.

How we can help

Designing variable compensation systems now more than ever requires a coordinated legal and technical approach, especially in organizations with complex structures or global incentive schemes.

If you want to review your variable compensation system or design a new one with legal certainty, our labor advisory team can support you throughout the entire process.