30 April is to non-recurrent results-based bonus schemes in Belgium what 29 March was to the UK: a doom and gloom deadline that turned out to be … well, no big deal, really.
But let us start with a small recap. Non-recurrent results-based bonus schemes were introduced by national Collective Labour Agreement nr. 90, which gave them the pet name “CLA nr. 90 bonuses”, as a measure to boost productivity (see our earlier post [here]).
They are very popular because of the advantageous tax treatment they enjoy: they are exempt from income tax up to 2,941 EUR per year (taxable amount after deduction of a 13.07% employee social security contribution and the employer pays a 33% contribution on top of the gross amount).
To enjoy all that national largesse, there are of course a couple of conditions to be complied with:
- The payment of the bonus is made dependant on the achievement of collective targets related to the company or a specific division thereof; these targets may range from the turnover of the company (or a specific department) to the reduction of the tons of copying paper used or the number of accidents at work, as long as the targets are collective, objective and measurable. Only individual targets and a target linked to the company’s share price are prohibited. Targets and bonus amounts may vary for different departments of the company. Partial achievement of a target may allow for a partial use of the tax-free benefit, but the bonus plan may also be all-or-nothing.
- The achievement of such targets is uncertain at the time of introduction of the plan. If hitting them is a nailed-on certainty from the start then there is no incentive effect and so the tax benefits are not provided;
- The bonus does not replace an existing component of the employee’s remuneration;
- The targets have a reference period of at least 3 months;
- The plan may be introduced retroactively (while the reference period has already started) but the retroactivity may only go up to 1/3rd of the total reference period. This means that plans which use the calendar year as reference period should be sent to the Ministry of Employment by 30 April of that year at the latest.
- Have you missed the boat for 30 April? Not to worry: the reference period does not need to be a full calendar year, as long as the minimum of 3 months is observed.
- Remember that the 2941 EUR is an annual figure, no matter how many such plans you manage to squeeze into the relevant year.
- The plan is to be introduced by collective labour agreement on company level or, if the company does not have a union delegation, through a company plan, in a specially designed format. The draft plan is to be posted on company premises for 15 days for worker consultation before it is sent to the Ministry of Employment for a check. As of this year, plans may also be submitted electronically.
- Employees who are terminated for cause, who resign or who have not worked at least half of the reference period may be excluded from payment.
Intrigued? Rightly so. The introduction of a CLA nr. 90 bonus plan needn’t be complicated and it seems to have little downside for either party, since the worst that happens is that you don’t gain a tax advantage you would otherwise not have had anyway. Get started today and have one in place before Theresa and Jeremy head to Brussels with a new deal. We are of course available to guide you through the process.