Since 1 January 2008, employers can grant their employees a "Non-recurring result-tied benefit" (“NRRB”): a bonus based on the collective results of the company, of the corporate group, or of a well-defined group of employees.
If the bonus is awarded according to the regulations, and does not exceed a maximum legal amount, it has tax and social security benefits.
To set up the bonus system, the company must establish a bonus plan under a special legal procedure. The bonus should be conditional on achieving clearly identifiable, transparent, definable/measurable and verifiable collective objectives. At the time of the plan's establishment, the realization of these objectives must be manifestly uncertain.
NRRB 2018 amounts
The maximum bonus amount is annually indexed.
The National Social Security Office does not consider the bonus as remuneration up to EUR 3,313.00 gross in 2018 per employee, i.e. EUR 2,880.00 net (+ a solidarity contribution of 13.07%) . The employer must pay a special social security contribution of 33% on the bonus.
Tax-wise, the bonus is exempt from tax up to a maximum of EUR 2,880.00 net in 2018 per employee.
Exclusion in the event of collective dismissal
Article 79 of the Program Act of 25 December 2017 changes the scope of the NRRB system.
Companies can now no longer introduce an NRRB system after announcing the firm’s collective dismissal with closure and pay part of an employee’s indemnity as a tax-friendly NRRB bonus. The explanatory memorandum points to the illogicality of an employer granting a bonus while also making its employees redundant.
Due to the legislative change, employers undertaking collective dismissal with closure are, since 1 January 2018, explicitly excluded from the scope of the NRRB system. However, existing bonus plans remain in force, provided they were submitted to the competent federal authorities before announcing the collective dismissal with closure.
! Point of action: If you wish to introduce an NRRB bonus plan with objectives for calendar year 2018, the plan must be submitted to the competent federal authorities before the end of April 2018.