Global employment briefing: Belgium, January, 2018

• Belgium

• Employment law

31-01-2018

New measure to allow staff bonuses outside the current pay rise cap

A new measure was introduced on January 1st which allows companies to award a cash bonus to their employees, based on the post-tax profits of the company.

Conditions

The bonus cannot be used to replace a benefit/salary payment to which employees are already entitled. Also, the total amount of bonuses awarded cannot exceed 30% of a company’s total salary cost.

Bonus options

The bonus can be paid as:

• Identical premiums i.e.as a standard amount or standard percentage of usual salary, payable to all employees; or
• Variable premiums, calculated according to specified objective criteria, the amount payable varying for different categories of employee.

Introducing the bonus scheme

The bonus can only be introduced at the instigation of the employer. Furthermore, the bonus is non-recurring so that the fact an employer decides to pay the bonus in one year, does not give rise to any future obligation to do so.

If the employer opts to grant an identical bonus sum to all employees, the scheme can be authorised unilaterally by the employer, by a simple majority vote at a general shareholders’ meeting. Additional stipulations are that the minutes of the meeting must record certain obligatory statements and the employees must be informed, in writing, of the company’s decision to pay a standard bonus according to the profits of the company.

In contrast, implementing a bonus scheme in which bonus awards vary cannot be introduced unilaterally and requires consultation and agreement, in accordance with existing collective bargaining procedure:

• Where there is a recognised trade union, the company must enter into a collective bargaining agreement; or
• Where there is no recognised trade union, the employer may choose whether to enter into a collective bargaining agreement or to follow the procedure for introducing the bonus by means of an act of adhesion.

Preferential tax treatment

Bonus payments under this scheme are not subject to usual social security contributions, so that:

• the employer does not need to pay social security contributions; and
• employee contributions are limited to 13.07% of bonus.

Tax liabilities regarding the bonus are reduced so that, for employees, their bonus payment will be subject to 7% tax. For the employer, since the bonuses are based on a profit-share arrangement, for tax purposes they are treated as a rejected expense and, therefore, are subject to 29% tax in the 2018 tax year.

The bonuses v the wage freeze?

Do these bonuses conflict with the current cap on wage rises? No, bonus payments under this scheme are not treated as a component of salary for calculating the wage norm (increases to which are otherwise capped at to 1.1% for the period 2017-2018).

Timing of introduction

The new bonus measure came into force on 1 January 2018 and will facilitate the introduction of schemes based on company profits for fiscal years closing on or after 30 September 2017.