Profit Premiums: Efficient but underused employee bonuses

As 2024 comes to an end, you may be considering offering a bonus to your employees and exploring the best option. It can be worthwhile to consider the profit premium if your company is expected to generate a taxable profit at the end of the current fiscal year. 

This type of variable pay is relatively unknown but is efficient and straightforward to implement. 

Relevant Figures:

• Maximum Total Amount of Benefit Granted to Employees: 30% of the total annual gross payroll.
• Social Security Contributions: No employer's contribution; only a deduction of 13.07% as an employee's contribution.
• Taxation: A flat tax of 7% to be deducted.
• Corporate Tax Deductibility: No deduction.

As a result, the cost-to-net ratio exceeds 60%. This means that if 1,000 EUR is spent as the total cost (including the absence of tax deductibility as a cost), the employee receives approximately 640 EUR as a net bonus. 

Easy to implement:

• For an identical premium (where all employees receive the same amount or a uniform percentage of their salary as a bonus), it is necessary to make a formal decision regarding this grant at a General Assembly. Subsequently, a notification letter should be sent to the employees informing them of their bonus. This process is straightforward.
• For a categorized premium (where the amount allocated to each employee is adjusted based on objective criteria such as seniority, grade, function, pay scale level, level of remuneration, and level of training), it is necessary to draft a deed of adhesion or conclude a collective bargaining agreement and complete additional administrative steps.

Overall, this is one of the most efficient tools for granting bonuses, yet many employers in Belgium are unaware of it.

We have extensive expertise in compensation & benefits, including variable plans (cash bonuses, profit premiums, collective bonuses under CBA 90, stock options, warrants, RSUs) and can assist you with them.

Feel free to reach out!