Objectively measurable collective objectives, for which there is no guarantee they will be achieved
Since 1 January 2008, it has been possible for an employer to award a bonus to their employees or to a well-defined group of employees which, unlike normal wages, does not disappear like snow in the sun following tax and social security deductions. This absolute exception is subject to various strict conditions. In the first instance, the bonus must be made conditional on achieving objectively measurable collective objectives of the company or group of companies, or of a well-defined group of employees. Reducing the number of absences or achieving ISO standard are good examples. However, objectives related to the share price of the company are excluded.
Procedure with or without trade union representation
If the employees, for whom a result-related bonus has been introduced, have trade union representation, the bonus system must be implemented via a collective labour agreement negotiated with them. This CLA must contain an allocation plan, for which the content is described in detail in the National CLA 90. In this regard, using a CLA template is compulsory. If the employees, for whom the result-related bonus has been introduced, have no trade union representation, a choice must be made: either the bonus is implemented via a CLA or via an act of accession (for which a compulsory template must also be used).
Social treatment of the bonus by the employee and employer
This system makes it possible to award a legally-specified maximum bonus amount, which is adjusted every year. In 2018, a maximum bonus of €3,413 can be awarded per employee. This is the social threshold amount. The standard social security contribution of 35% is not due by the employer, but a special contribution of 33% is due.
Until recently, the employee did not have to pay anything. Since 1 January 2013, employees have to pay a solidarity contribution of 13.07% on the bonus amount paid out.
Tax treatment of the bonus by the employee and employer
The fiscal threshold is equivalent to €2,968 (€3,413 – 13.07% solidarity contribution) per employer in each calendar year. For tax purposes, this result-related bonus is not taxed on the part of the employee, and is therefore gross for net. As such, no withholding tax needs to be deducted from it by the employer. The employer himself can deduct the bonus paid out as a business expense, as well as the special contribution of 33% that he paid on it.
What if the maximum amount is exceeded?
If the employer grants his employees a benefit that exceeds the maximum amount of €3,313, only the excess is subject to the normal tax and social security contributions that apply to wages. In the event of dismissal, the result-related bonus will not be included in the calculation of the severance pay, as according to labour law, it is not an actual wage.