Attracting, incentivising and retaining your employees requires a smart approach to the design and structuring of your compensation plan and reward offering. At the same time, keeping an eye on the cost effectiveness and compliance of the remuneration strategy is vital to your business.
Belgium is one of the highest taxed countries in the world. However, our complex legislation allows for various possibilities to optimize the net to cost ratio of your remuneration. Also, before proceeding with important investments, it is recommended to obtain good advice from an experienced specialist. The consequences of a wrong choice or a good choice can be extremely significant. Our Global Employer Services specialists strive to collaborate with you to optimize the cost of employment for companies, while ensuring the highest possible net result for the individual, be it as independent or as employee.
Thinking of optimizing the remuneration package of your personnel? As we are constantly monitoring new legislation, we can help you to redesign the salary structure and benefits offered to your personnel. RSM Belgium can assist you with optimizing your regular monthly salary or compensation and benefits package.
Alternatively, there are also several bonus optimization possibilities in Belgium:
Compensation and Benefits / Optimization of salary packages
Bonus optimization possibilities
Below you can find a non-exhaustive overview.
Compensation and Benefits / Optimisation of salary packages
One of the obligations of an employer is to provide its employees with the required tools and materials for their work. Amounts which are a reimbursement of costs to be taken at charge by the employer are excluded from the concept of remuneration. It only concerns costs at charge of the employer resulting from the execution of the labour agreement. The employer should be able to demonstrate, based on evidence, that the cost reimbursements correspond with reality. RSM can guide you with the determination of the proper amount of costs proper to the employer and guide you with tax ruling requests, building of a support file and the implementation of these cost reimbursements in the policy of your company.
The employer can attribute meal vouchers to its employees, which the employees can use in public restaurants, food stores or supermarkets. These meal vouchers are delivered electronically on a card which the employee can use freely.
In principle, meal vouchers are considered as a social benefit in case the following conditions are met simultaneously:
- The meal vouchers are granted on the basis of a collective labour agreement at the level of the sector or of the company, or in a written individual agreement;
- The number of vouchers equals the number of days during which the employee has actually worked, so one meal voucher per day worked;
- The vouchers must be handed to the employee every month according to the estimated number of days the employee will work during that month, with a correction every three months;
- The vouchers must be in the name of the employee;
- The validity of the meal vouchers is limited to 12 months as from the moment it has been delivered electronically on his meal voucher card and can only be used to purchase a meal in a restaurant or food in food stores or supermarkets;
- The employer may contribute up to a limit of 6,91 euro per voucher and the employee must contribute at least 1,09 euro per voucher (this brings the total maximum amount per meal voucher to 8,00 euro);
- The meal vouchers cannot replace salary
- If the employees have access to a company cafeteria, the cost of a meal should equal or exceed the actual cost of the meal. In case meals are provided below this price, the employees should spend their entire meal voucher without receiving any cash change.
This implies that the benefit is not subject to income taxes and social security contributions on behalf of the employees and that the related costs are not tax deductible for the employer. Otherwise, meal vouchers granted by the employer to its employees constitute a taxable benefit in kind for the individuals concerned.
It is common in Belgium for the employer to conclude a hospitalization insurance for its employees. As per Belgian legislation, providing a hospitalization insurance to its employees and his or her family members is free from social security contributions and withholding taxes in case this insurance is concluded by the employer.
Similar to the hospitalization insurance, an employer could conclude a group insurance for its employees to cover the risks of invalidity or death, but also foresee in an additional pension. The employer contributions made within this framework are free from social security contributions and withholding taxes in Belgium.
Next to the employer contributions, it is possible to deduct a small percentage from the employee’s monthly pay through the payroll as a personal deduction for the extralegal pension. For these contributions, the employee receives a tax reduction in his annual personal income tax return.
Bonus optimization possibilities
Non-recurring result-tied advantages are advantages linked to collective achievements by the company, a group of companies or a well-defined group of employees, based on objective criteria. These advantages depend on the realization of clearly defined, transparent, definable/measurable and verifiable objectives, which are uncertain at the implementation of the bonus plan. These advantages are exempt from personal income tax and are only subject to a solidarity contribution of 13.07% by the employee and 33% by the employer. Our specialists can assist you with the practical implementation of this type of bonus plan.
The profit premium system allows companies to allocate part or all of the profit from a financial year to their employees. The granting of the profit bonus is not linked to the achievement of collective targets and must be granted to all employees of the company. It cannot be introduced to replace or convert salary, premiums, benefits in kind or any other benefit.
An identical profit premium could be introduced, the amount of which is the same for all employees or the amount of which corresponds to an equal percentage of the employees' pay. The identical profit bonus can be granted by a decision taken by the ordinary or extraordinary general meeting of the company and by a simple majority of votes.
Alternatively, a categorized profit premium could be introduced, the amount of which depends on a certain distribution key applied on the basis of objective criteria (e.g. seniority, grade, function, salary). The differentiation between the various amounts under the categorized profit premium may not exceed the ratio between 1 and 10. If there is no trade union delegation in the company, the employer has the choice of introducing it via a collective labour agreement or via an act of accession.
Over the years, companies have been trying to retain and reward high-performing employees through various incentives. Belgium has advantageous tax schemes for equity-based rewards, such as stock options and restricted stock units. Several Belgian banks offer products which take advantage of these tax schemes. In the case of stock options, Belgium’s legislation provides a flat-rate taxation at the time of grant, which is directly opposite to other countries, which tax stock options at the time of exercise.
Individual bonuses, up to 20% of the annual remuneration, can be granted in the form of a bank product called warrants. Warrants are excluded from social security contributions and subject to withholding tax. Social security contributions normally amount to approximately 27% for the employer and 13,07% for the employee (uncapped).
On cash bonuses, vacation pay of approximately 15% is due whereas on warrants no vacation pay is due. A downside to warrants is that they are blocked for approximately 1 working day, resulting in a small exposure to the stock market risk.
A further optimization exists in the form of over the counter-options (OTC’s) which not only foresee an exemption of social security contributions but also a significantly a lower taxation. There is however a much longer exposure to the stock market risk.