Employers in Belgium May Consider Bonuses for Employees

As wage negotiations continue, employers in Belgium could consider the possibility of granting bonuses to their employees.

The wage dispute between Belgian Trade Unions and employers grabbed headlines in February when a general strike was called. The industrial action drew in major industries - and resulted in the cancellation of over 60% of flights, along with disruption to train and road journeys. The dispute concerns the margin for 2019 and 2020 wage increases: trade unions are seeking a 1.1% increase along with better pensions and work-life balance, and an earlier retirement age.

With the wage negotiations ongoing, employers in Belgium may choose to award bonuses as an alternative way to boost their employees’ remuneration.

Granting Employee Bonuses

More specifically, employees in Belgium may be granted one of two particular bonus types: non-recurring, results-related bonuses or profit participation bonuses. Both bonuses can be implemented independent of wage levels and so are particularly useful when wage ‘norms’ are not known - as is currently the case in Belgium.

Employers planning to grant these types of bonus should explore the conditions and criteria for doing so...

Non-Recurring, Result-Related Bonus

The non-recurring, results-related bonus falls under the mandate of the national Collective Labour Agreement No.90 - and is often referred to as the ‘CLA 90 bonus’. The bonus is a collective benefit and is subject to a 33% special social security contribution from employers, and a 13.7% solidarity contribution from employees.

What are the advantages of the CLA 90 bonus?

The bonus comes with certain favourable tax and social security conditions for employers, including:

  • Exemption from withholding tax
  • Consideration as a tax deductible business expense
  • Not being taken into account when calculating indemnity for notice and holiday pay

How much bonus can be granted?

The CLA 90 bonus is subject to a threshold, adjusted each year to the cost of living. In 2019, that involves:

  • The social threshold:  €3.383 per employee, per year (and subject to the 13.07% employee solidarity bonus)
  • The fiscal threshold: €2,941 (exempt from taxes)

What are criteria for granting the C90 bonus?

The C90 bonus can only be granted under the following conditions:

  • As a collective benefit, the C90 is subject to predetermined goals being met by either a group of employees, or companies.
  • Those goals must be clearly measurable and verifiable. Examples might include turnover during a certain period, or a reduction in work errors.
  • The introduction of the bonus should be made at a time where the possibility of achieving the desired goal is uncertain.
  • The bonus should be drafted formally - as part of a collective labour agreement, for example. From 2019, a model document has been issued.

Profit Participation Bonus

The profit participation bonus is a way of passing on a portion (or all) or a business’ profits to its employees - with favourable tax treatment. Like the C90 bonus, the profit participation bonus is a collective benefit.

What are the advantages of the profit participation bonus?

Employers do not have to make a social security contribution to the profit participation bonus - however, employees must make the 13.07% solidarity bonus, and pay tax on it at a rate of 7%. The bonus is also not deductible as a corporate tax business expense.

How much bonus can be granted?

The profit participation bonus has an upper limit of 30% of a business’ total wage expenditure.

What are the criteria for the profit participation bonus?

Profit participation bonuses may be granted under the following conditions:

  • The business issuing the bonus is subject to corporation tax, or non-resident taxes.
  • Employees must be allocated equal amounts (or percentages) of bonus - and informed of the award amount by written notification.
  • If profits are being allocated differently for different groups of employees, that allocation structure must be established in a collective labour agreement.
  • From January 2019, employers can exclude employers who have resigned or who have been dismissed for serious cause, from the bonus. Employers may also take periods of employee inactivity into account when calculating the bonus percentage.

For more information on tax and social security in Belgium, check out activpayroll’s Global Insight Guide to Belgium.