Wage standard
The Belgian wage standard for 2023-2024 was officially set at 0% in May 2023. This standard determines how much the average wage cost per employee may increase over the next two years. It excludes any structural salary increases until the end of 2024, beyond the standard indexation and pay scale adjustments. Employers who do not respect the standard, risk being fined. The fine is multiplied by the number of employees involved, up to a maximum of 100 employees.
However, certain elements such as the Non-Recurring Bonus, Profit-Sharing Bonus, Purchasing Power Premium or Innovation Premium are not taken into account when calculating the wage standard. This means that the employer can still grant these bonuses, even if the wage cost may not be further increased in the company.
Non-Recurring, Result-Driven Bonus
This is a collective bonus scheme, governed by Collective Labor Agreement No. 90, associated with the company’s results that benefits from a favourable tax treatment.
The bonus itself is not subject to any payroll withholding tax, is a tax-deductible expense for the company, and is not considered for calculating the severance pay and holiday pay. It is only subject to a special employer social security contribution of 33% and an employee solidarity contribution of 13.07%.
It should be noted that the bonus cannot exceed a certain annual limit:
- Max. limit for social security = €4,020 (for 2024) per employee per calendar year (before the above 13.07% deduction).
- Max. limit for taxes = €3,496 (for 2024) exempt from income tax.
The bonus plan is a benefit contingent upon meeting certain predefined collective results or objectives. These goals must be applicable to the company, a group of companies, or a specific group of employees within the company. They need to be clearly outlined, transparent, measurable, and verifiable, often involving figures verified on the basis of your accounting documents. These goals can be, for example, reaching a certain turnover, decreasing error margins or complaints from customers, increasing the number of clients, etc.
The achievement of these goals must be uncertain at the moment of introduction of the plan. Additionally, the bonus plan must adhere to specific formalities, including drafting a document of accession or Collective Bargaining Agreement (CBA).
Profit-Sharing Bonus
It allows a company to share its profit with their employees. It has a collective nature and benefits from a favourable tax treatment, just like the above Non-Recurring Bonus. It is not subject to any employer social security contribution, but the employee will also pay a 13.07% solidarity contribution and a fixed 7% of payroll withholding tax on top of that.
There is no maximum amount, but the bonus may not exceed 30% of the total gross salary amount of the company in the relevant financial year. It is important to mention that the Profit-Sharing Bonus is not tax-deductible for the company. The conditions for granting the bonus include the requirement that the employer is subject to Belgian corporate tax or (corporate) non-resident tax.
The bonus amount is solely based on (part of) the company’s profit. If the employer allocates an identical amount or percentage to all employees at the same time, a decision of the General Meeting and written communication are sufficient. However, if different bonuses are intended for different categories of employees, a document of accession or Collective Bargaining Agreement (CBA) are also required.
The employer can exclude employees from this bonus who have been dismissed for serious cause or who resigned from the company during the relevant financial year. Additionally, the employer can also take into consideration certain periods of inactivity of employees when determining the bonus.
Innovation Premium
It is a premium that an employer can give their employees who come up with a new idea that adds value to the company’s activities. If the premium meets the legal conditions, it is exempt from tax and social security contributions.
The innovation itself should be in an implementation stage, a prototype should be available or there should at least be internal instructions showing which changes will result from the innovation for the normal activities of the company involved.
It should be noted that the premium cannot exceed certain limitations: (i) the amount should not exceed 1% of the total salary amount paid by the employer; (ii) the number of employees receiving a premium should not exceed 10% of the total number of employees; (iii) it can be granted to a max. 10 workers per innovation; (iv) the amount should not exceed a monthly remuneration.
The premium cannot be granted to replace another benefit and the beneficiary should have an employment contract with the company granting the premium (i.e. thereby excluding temporary agency workers). Both the Federal Public Service of Economy and the National Social Security Office should be properly notified when an innovation premium has been granted within the company.
Conclusion
Whether you should opt for one or the other type of bonus, largely depends on the desired reward structure and what exactly you intend to reward. Would you like to reward all employees in the company or only a certain category? Combining different types of bonuses is also possible, which creates flexibility for rewarding your employees.
The Purchasing Power Premium (up to €750,00 and awarded in the form of consumption vouchers) could only be issued until 31 December 2023. While the final payment date has recently been extended until 31 March 2024, the formal decision to award them should have been taken in 2023.
The Non-Recurring Bonus, Profit-Sharing Bonus and Innovation premium remain available in 2024.