Tax on the recruitment bonus for new employees
May 2022 – For many companies, finding competent employees is not an easy task. Many of them, therefore, grant a recruitment bonus to employees who introduce a new employee to them. The Tax Ruling Commission has recently published a decision concerning the tax regime applicable to this recruitment bonus.
The facts
X is a company providing services. As it is unable - like many other companies in the sector - to find competent employees, it decides to grant a recruitment bonus to anyone who presents a valid candidate. This bonus can be awarded to the company's own employees, but also to third parties. This initiative is disseminated via different types of channels, including the company's website, social networks, etc.
The amount of the bonus varies according to the profile of the candidate presented, and more particularly the relevant professional experience of the latter.
Conditions
The granting of this bonus is subject to certain conditions:
only new candidates can be presented. Former employees, trainees, student employees, etc. are not eligible;
the candidate must be proposed via a specific procedure;
the recruitment bonus is granted for all vacancies published on the company's website;
the person presenting the new recruit is informed of the decision at the end of the hiring process;
the candidate must remain in service for at least six months. The recruitment bonus is paid at the end of this period.
The same person may receive a hiring bonus more than once a year.
Staff members or third parties
As mentioned above, the recruitment bonus can be granted not only to staff members of the company, but also to persons outside the company.
A staff member is defined as any employee who is working for the company at the time of referral of the candidate. This does not include HR employees, partners or directors of the company.
A person from outside the company is understood to be any person who is not in service with the company, excluding external HR companies, temporary employment agencies, trade unions, etc.
How is the recruitment bonus taxed in the hands of the workers?
The law describes remuneration and salaries as all payments that constitute, for the worker, the product of work in the service of an employer. According to this definition, gifts or discounts granted by an employer to his staff are in principle a form of taxable remuneration. The recruitment bonus could therefore be qualified as remuneration.
The Ruling Commission points out, however, that the Administration allows taxpayers to show that a benefit is not based on the employment relationship or that it could have been obtained if the professional activity had not been carried out. This is precisely the case here: the recruitment bonus can be granted not only to the company's own staff, but also to third parties.
Therefore, the bonus paid to the company's own staff is not to be considered as remuneration. The amount paid to the company's own employees must be taxed in the same way as the amount paid to third parties as a recruitment bonus.
How is the recruitment bonus taxed in the hands of third parties?
While the Ruling Commission is at first sight rather tolerant regarding the taxation of the recruitment bonus for own staff, it is rather strict when the bonus is granted to third parties. According to the Ruling Commission, the recruitment bonus has to be considered as an incidental benefit, both for third parties and for own staff. In other words, the bonus is taxable as miscellaneous income at a rate of 33%.
You can deduct your expenses, but no flat rate applies: only expenses that are actually proven can be deducted.
In addition, the Ruling Commission considers that the recruitment bonus can only be considered as an incidental benefit if it is not granted more than twice to the same person.
This condition is the result of a negotiation. It is not a rule prescribed by law.
What if the same person presents more than two candidates? In this case, is the bonus considered remuneration or is it another type of income?
In any case, companies wishing to grant a recruitment bonus may consider paying people from outside the company who introduce new employees. In any case, this procedure benefits the company's own staff, at least to some extent.
