Bonus schemes: what to do in 2023?
The wage norm (= the maximum wage cost development) is set every two years and determines the maximum increase of the salaries in Belgium and at the same time functions as a kind of framework for the biennial wage consultations in the sectors and companies.
For 2023 - 2024, the maximum margin for wage cost development has been set at 0%, which means that wages cannot increase on top of indexations and scale increases. However, not all salary elements are taken into account. In this newsletter, we would like to highlight the possibility to grant employees a non-recurring, result-related bonus or a profit participation bonus. Neither of these bonuses are taken into account for the wage norm. In other words: you can grant these bonuses even when the salary cost in your company may not increase any further.
The non-recurring, result-related bonus
The Belgian legislation foresees in a collective bonus system linked to the results of the company which benefits from a favourable tax treatment. The legal basis for this bonus is collective labour agreement n° 90.
What are the advantages of this bonus?
The CLA 90 bonus is not subject to withholding tax, is tax deductible as a business expense and is not taken into account for example for the calculation of the indemnity in lieu of notice and the holiday pay. It is however subject to a special employer’s contribution of 33% for social security purposes and a solidarity contribution of 13.07% for the employee.
Is there a maximum amount which can be allocated?
Yes, the benefit cannot exceed a certain threshold, that is adjusted to the cost of living on a yearly basis:
- Social threshold = € 3,948 (amount 2023) per employee per calendar year. This amount is subject to a solidarity contribution of 13.07% for the employee.
- Fiscal threshold = € 3,434 (amount 2023) which is exempt from taxes.
What conditions need to be fulfilled for granting the bonus?
- It’s a collective benefit, subject to achieving certain collective results or goals that have been determined in advance;
- The results or objectives must apply to a company, a group of companies, or a well-defined group of employees;
- The results or objectives must be clearly outlined, transparent, determinable/measurable and verifiable. In practice, we notice that objectives linked to numbers (control based on accounting documents) are particularly accepted. Examples of objectives are: achieving a certain turnover during the reference period, decreasing the error range, decreasing the complaints from customers, the increase of the number of clients, …
- At the time of introducing the bonus plan, it should be uncertain whether the results or objectives will be achieved;
- The bonus plan should meet certain formalities, such as drafting an act of adhesion or concluding a collective labour agreement. A mandatory template document must be used. Pro-Pay can assist you in completing this form correctly.
The profit participation bonus
This bonus allows a company to grant a part or the full amount of the profit gained by the company to the employees and benefits on tax and social security level from a favourable treatment. It has a collective nature, just like the non-recurring result-related bonus.
What are the advantages of this bonus?
This bonus is not subject to employer’s contributions for social security purposes. The employee will pay 13.07% as a solidarity contribution and will taxes at a flat rate of 7%.
Is there a maximum amount which can be allocated?
There is no maximum amount as such provided for by the law, but the total amount of the bonuses may not exceed 30% of the total wage mass of the concerned fiscal year. Please note that the profit participation bonus is not deductible as a business expense for corporate taxes.
What conditions need to be fulfilled for granting the bonus?
- The company is subject to corporate taxes or to taxes for non-residents in Belgium;
- The allocation is only possible based on (part of) the profit;
- If the employer grants an identical amount or percentage to all employees, the only formality is a decision of the General Assembly and a written notification by the employer;
- If the employer wishes to grant different bonuses to different categories of employees, an act of adhesion or a collective labour agreement on company level will be required;
- The employer can determine that employees who have been dismissed because of a serious cause and/or employees who have resigned and have left the company during the course of the fiscal year, are excluded from receiving this bonus;
- The employer can also take into account the working percentage of the employees and exclude certain periods of inactivity of the employees during the fiscal year.
Which bonus to offer your employees?
Which premium is best for your employees, depends on what it is you wish to reward exactly.
Would you like to link the bonus to the achievement of certain goals or rather not? Would you like to reward all employees or just one certain category? Or maybe you’d like to combine both bonuses? Even that is possible.
If your company is not subject to corporate taxes or taxes for non-residents in Belgium, the allocation of the new profit participation bonus is not possible. Introducing a non-recurring result-related bonus on the other hand remains a possibility.
Do not hesitate to contact us if you need additional information or if you need assistance through legal@propay.be
