Exempt salary bonuses increasingly popular
April 2021 – "Non-recurring benefits linked to results". This is the exact name of the benefits that an employer can distribute to his staff free of tax and, in part, also free of social security contributions. The scheme has already existed since 2008. The new ceilings for benefits paid from 1 January 2021 are now known.
Conditions
The conditions are actually quite simple. As an employer, you set a target and if your company achieves this target, you can grant a bonus to staff.
You therefore need to introduce a bonus plan with clearly defined, transparent, definable/measurable and verifiable objectives. In larger companies, the plan is included in a CLA, but it can also be included in a deed of accession, which you then have signed by the trade union secretary of an employer's representative organization.
In principle, the objectives cannot be changed during the plan. Since 2019 you can make changes, but only for the future: not for the past or for the current reference period. For example, you can plan that by 2025 you want a 100% increase in turnover from 2020, to be achieved in 20% annual increments. You may then decide in 2022 to raise the bar a little higher (e.g. a 125% increase in turnover by 2025), but this new target will only apply for the years 2023 to 2025.
It must be a non-recurring benefit. This implies that the target is set for a fixed period. The bonus plan expires when this period ends.
In addition, the bonus must be granted to all employees or at least to a clearly defined group of employees on the basis of objective criteria.
Exempt from tax and also from social security contributions (or at least almost)
The salary bonus is exempt from personal income tax. The benefit is also not considered as remuneration by the NSSO. It is therefore not subject to ordinary social security contributions. However, the law provides for several special contributions. There is a special contribution of 33% of the bonus for the employer and a solidarity contribution of 13.07% for the employee, to be withheld by the employer.
Both the bonus and the special contribution are tax-deductible business expenses for the employer.
Ceilings for 2021
There is a ceiling on the amount that you as an employer can pay. This ceiling is linked to the health index. The ceilings for benefits paid from 1 January 2021 are as follows
for the NSSO: EUR 3,447 (EUR 3,413 in 2020) ;
for the tax authorities: EUR 2 998 (EUR 2 968 in 2020).
The difference between the two amounts is explained by the solidarity contribution of 13.07% to be retained by the worker.
These amounts apply per calendar year and per worker.
If the ceiling is exceeded, the part of the bonus that exceeds the ceiling is regarded as ordinary pay, which means that you as the employer must a) pay the employer's social security contributions, b) deduct the personal social security contributions and, above all, c) deduct the wage tax.
If you want to introduce a bonus plan, you also have to comply with a whole series of formalities and procedures. Since January 2019, new forms must be used and, since March 2019, part of the procedure can be carried out online. It is important that you do this in good time. A bonus plan (whether introduced via a CLA or via a deed of accession) must always be filed before one third of the reference period defined in the plan has elapsed. A salary bonus plan with a reference period of a full calendar year, for example, must be submitted by the end of April.
