The end of the year is approaching... Don't miss this opportunity to boost your employees' motivation with an individual bonus. It’s a win-win situation, since you also benefit from it from a tax perspective.
The search for the optimal remuneration package remains a challenge for companies in Belgium. And for good reason - the tax burden on working remains high in our country. Fortunately, alternative solutions offer the possibility of ‘supplementing’ your employees' salaries while benefiting from a reduction in your tax bill... From profit-linked bonuses to individual bonuses, various forms of bonus are on the rise. These are rewards that improve team cohesion, and motivate and strengthen the commitment of your employees. But not all solutions are equal... Compare and identify what best suits your objectives.
One reward is not the same as another
Each instrument has its own rules and constraints. Take the individual cash bonus: your employee may be disappointed when he/she sees the net amount left in his/her pocket after deducting social security contributions and taxes. As for the profit-linked bonus, which allows you to share out positive results, this must be given to all your employees. But the measure is quite simple to implement and relatively attractive from both a tax and a social point of view. What about the collective wage bonus (CCT 90)? This scheme also benefits from a favourable tax provision, but the amount is limited. What about warrants as individual bonuses? It’s an option that has been successful...
How do warrants work?
First, they are an individual reward scheme, so you keep control of the amount being offered and the employees who benefit from it. In practice, the warrant is a financial instrument, the equivalent of an option. Once purchased from an issuer, you allocate the warrant to your employee. The latter then confers the right - and not the obligation - to buy or sell shares at a predefined price (according to certain terms and conditions). Staff are free to manage their ‘bonus’ according to their particular risk profile. If they are cautious, they can sell it at its market value the next day. This is a way to limit financial uncertainty to a single night. For the more patient, there is nothing to prevent them from waiting in the hope of pocketing a nice capital gain (no later than before the end of the contract). Alternatively, the warrant can be converted into shares in the underlying mutual fund at the price defined in the contract.
Motivation, deductibility and simplicity
This individual bonus looks attractive because it also brings benefits for both parties.
- Your employees receive a higher net amount than with a cash bonus, since no social security contributions are due. And if there is a capital gain, it is not taxed.
- For your company, there is the possibility of reducing its tax base, as the amounts are 100% deductible as expenses. You are also exempt from NSSO obligations (provided that the warrant does not replace an existing salary or benefit). Note that professional withholding tax on earned income is still due.
As for the amount to be offered, this must be ‘proportional’ to the worker's normal salary. Other benefits In addition to its flexibility and the motivation of your troops, a warrant plan is relatively simple to implement, with the option for employees of managing their ‘bonus’ on a digital platform.
5 actions to take — immediately — for a successful end to the tax year
Your success is not only based on the quality of your products or services. Without effective tax and financial optimisation, you risk losing valuable profits... Over to you!
The end of the calendar year is approaching. This is the holiday season, but it’s also the time for closing the annual accounts. As with your presents, don't wait until the last moment to ‘pamper’ your business, especially since you have a number of financial and tax levers at your disposal to give 2019 a good send off. You have a few months left to make some accounting adjustments, optimise your results and look after your employees - all without ever neglecting your cash flow. The objective: to be ready for the evening of December 31. Ready to take action?
1. Reduce your tax bill
You are certainly familiar with the mantra: true optimisation often means reducing your tax base. In other words: reduce the size of the slice on which your taxes are calculated. How? Thanks to the tax ‘gifts’ provided by the legislator. Several solutions exist, from the most known to the most original. Take the time to analyze, compare and possibly combine them to get the most out of them.
2. Review your investment planning
Is your annual profit sure to exceed expectations? Good news, but beware of the backlash from the tax authorities. If you had investments planned for 2020, it may not be too late to bring them forward to 2019. It’s one way to reduce your tax base. On top of that, you could (in specific cases) take advantage of the special (and temporary) 20% deduction. You should also know that next year will mark the end of digressive depreciation for any new investment... Think about it!
3. Pay your taxes in advance
This is the indispensable principle of tax pre-payments. The fact is that each year you have four windows during which you can pay your dues in advance. The benefit? You avoid a surcharge, which is getting increasingly harsher - 6.75% for companies (in 2019). The dates to note are April 10, July 10 and October 10 and December 20 at the latest for the last payment of 2019.
4. Pamper your employees
The holiday season means presents. It’s the perfect time to reward your staff for their efforts. And Belgium provides all sorts of possibilities for offering that little extra that makes all the difference. Tax-efficient solutions such as salary bonuses linked to collective objectives or allocated in the form of warrants. Win-win solutions!
5. Preserve your cash flow
Finally, remember that December means significant but predictable expenses, such as year-end bonuses. Just like other recurring and one-off expenses (holiday pay, for example), it’s often worth spreading them out over time by setting aside funds for them. It’s an ideal - and tax-efficient - way to avoid drawing on your cash flow.
Who will be the first employee to be rewarded in your company? You?
A truth, repeated over and over again, remains... a truth. The wage cost in Belgium remains a burden for companies. The good news is that you have other ways to reward your staff.
A one-off cash bonus is expensive... and what the worker gets is often disappointing. Fortunately, much more interesting options have flourished. Salary bonus, profit-related bonus or warrant? Individual or collective extras? Performance-related or not? It's à la carte! Indeed, companies have a wide range of solutions for rewarding their employees. They are an excellent lever for strengthening team motivation or attracting (and retaining) new talent. Not to mention that each system has its own advantages - particularly in terms of taxation - for the company. All you have to do is choose...
1. Warrants - the route to optimisation
This first option allows you to individually grant a financial security to employees. This gives them the right to buy or sell shares at a predefined price (under certain conditions). Workers are free to resell their warrants the next day at their current market value or wait and resell them later with the hope of an increase in value. They may also decide to convert them into units of the underlying mutual fund (SICAV). This is a flexible, simple tool to set up to optimise your staff's salary. The other advantages are that
- your employees receive a much higher net amount than with a cash bonus, because they only have to pay professional withholding tax,
- and, for the employer, no social security contributions are due. Better still, you can deduct the warrants for tax purposes.
2. The profit bonus: a share of the company's results
A newcomer in the Belgian landscape, this is a collective benefit, so all the company's employees must therefore profit from it. The profit-sharing bonus is not linked to individual results, but may be discretionary (based on function or seniority). In this case, a company agreement is required. A sine qua non condition: the company must make a profit... If so, you can freely determine the amount granted, but the sums may not exceed 30% of the total payroll. No national security contribution is due, but this extra is subject to the Isoc...
3. The CCT 90 bonus plan: collective objectives achieved
The name may not be snappy but the “non-recurring results-linked benefit” covers an add-on based on the achievement of collective (and uncertain) objectives linked to clear criteria. The bonus must also be the subject of a company agreement or an act of accession. In practice, you cannot exceed 3,383 euros gross (for 2019) per worker... equivalent to nearly 2,940 euros net. While the bonus is 100% tax deductible for the employer, a special contribution of 33% must be added...
You have plenty of choice. The key is to establish an optimised bonus strategy - for the company and its employees.
3 smart fringe benefits
A pension scheme, hospitalisation insurance and devices remain fixed items within the remuneration package. A creative approach means that the cost of these is manageable.
Company cars, group insurance, various types of cheques, an internet connection at home, working part-time or even childcare through the employer – each of these is an example of fringe benefits. Although the social and tax regulations for each benefit type are different, they do have one common characteristic: employees love them. Let's look at three of the most popular benefits in more detail:
Devices – the ideal fringe benefit?
Hip, handy and sought after: smartphones, laptops or tablets have everything needed to be a dream fringe benefit. Employees are delighted and they are a benefit which employers can perfectly justify. Communication plays a key role in any company. However, the challenge is ensuring that costs are kept at a reasonable level. How should you approach this?
- Set your employees a maximum amount for their mobile phone usage. Whoever exceeds the limit, pays the difference. A third of companies offering staff a mobile phone employ such an arrangement. On average, the employer ends up paying €25 to €50 per month, but for more senior roles, this amount will often be significantly higher.
Mobile phone operators have also developed special packages in order to process the administration relating to split-bill arrangements. For any amounts below the limit, they send the bill directly to the employer. The employee is billed directly for any extra usage.
- Ask your employee to pay back a fixed amount each month by way of a salary deduction. This way, you as an employer can recover a part of the costs and also restrict the taxable benefit as far as your employee is concerned.
The "normal" taxable benefit amounts to €12.50 per month for a mobile phone or a smartphone, €15 per month for a laptop or tablet and €5 per month for mobile internet or broadband internet at the employee's home. If the employee completely repays that benefit, then they are no longer liable for taxes on the personal privilege resulting from the benefit.
Saving for later – the supplementary pension scheme
According to a survey by SD Worx, 81% of Belgian employers are contributing to a supplementary pension for their employees, who are increasingly coming to greatly value this benefit. This is not only due to lenient tax treatment, but also due to the growing focus on the pension issue. If you, as an employer, also wish to do this, then you have a number of different possibilities.
- Group insurance or pension scheme
With a collective pension scheme, you build up, with fixed, monthly payments, supplementary pension capital for your employees. Sector or company CLAs increasingly require such a scheme to be set up, with or without being "social" in nature. Despite this, premiums for non-statutory pension accrual usually remain relatively modest.
If you want to do something extra for your staff's pensions, then a supplementary pension scheme also offers fiscally attractive opportunities for paying out a classic bonus or end-of-year premium. Tax and social deductions on pension payments are minimal, whereas around half of a normal bonus will disappear.
- Personal pension scheme benefits
You also have the possibility of further optimising the pension scheme of your most valuable employees – think of managers or self-employed company executives for instance – on an individual basis. This can be done thorough so-called personal pension scheme benefits. Very strict rules apply to this, including respecting the 80% rule. This states that the employer contribution for this non-statutory pension, together with the statutory pension, may be no higher than 80% of the employee's last normal annual gross salary.
Furthermore, for your wage-earning employees, a ceiling of €2,340 (the amount for 2016) is also in force, per employee and per year. Finally, take account of the fact that personal pension scheme benefits cannot be created in the 36 months preceding (early) retirement.
Hospitalisation insurance: affordable care
Nowadays, hospitalisation insurance is almost indispensable. Employees also especially value this particular benefit. Three points to consider:
- As an employer you are obliged to inform your employees that they are entitled to personally continue the collective policy if they leave the company. With individual continuation in later life, however, the premium can be very expensive. In order to avoid the premium for a future transition already being too high, your employees can take out a waiting policy in order to pre-finance their future premium. You are also obliged to inform affiliates of this. With such a waiting policy, upon later transition, your employees pay a premium based on their initial affiliation age.
- In agreement with your insurer, you confirm whether your employees are or are not obliged to affiliate themselves to the collective hospitalisation scheme. Ensure that you establish hospitalisation insurance as a voluntary fringe benefit that your employees may replace with another optional benefit of their choosing. If insufficient employees are affiliated to the collective policy, the premium for each employee may increase.
- The premium which you as an employer pay for a collective hospitalisation insurance scheme is a benefit which is exempt from tax. For you as an employer, however, these costs are not tax deductible.
Performance-related salary bonuses increasingly popular
CLA 90 performance-related bonus schemes are on the increase. Last year, 15% of administrative workers and 12% of manual workers received this type of bonus. As an employer, you could effectively combine such a bonus scheme with just about any objective and clearly measurable goal which you would like to see achieved within your company.
Examples are profit increase, cost reduction, a reduction in average delivery time, reducing the number of accidents at work or sick days, etc.
It is important to note that collective goals must be the focus here and that all employees (or a clearly defined group) must be involved in the scheme.
The advantages of a bonus scheme
Paying out a little extra through such a bonus scheme has some important advantages. Let's cover the main ones:
- If the maximum amount is respected – €3,219 per employee in 2016 – at the social level, the paid-out bonus is only subject to the 33% special employer contribution and a 13.07% employee deduction. The tax burden is also minimal.
For example: An "ordinary" bonus that generates €1,000 net for the employee, costs the employer €2,695.90. For a performance-related bonus, the cost falls to €1,503.80.
- For the employer, the bonus is fully tax-deductible as an operating cost.
- The salary bonus does not count in the calculation of holiday pay and the end of year premium.
- A performance bonus can never become an acquired right. It is given once and you are never obliged to repeat it the following year.
- Performance-related salary bonuses fall outside the government's ruling. This way, it's perfectly legal for you to provide your employees with a little extra.