The end of the year is drawing near and you are considering granting a bonus for the time worked in 2018? Then take into account the extra costs associated with the social security contributions and the holiday pay. A bonus is not always subject to social security contributions. Therefore a number of conditions must be met. We will list them below.
SOCIAL SECURITY CONTRIBUTIONS: FOUR CONDITIONS
Social security contributions are due on the employee’s gross wage, i.e. as well on the fixed monthly wage as on the variable wage. For the concept of ‘wage’, reference is made to the wage protection law. It concerns (I) the wage in money, or the benefits with a monetary value, (II) to which the employee is entitled (III) as a result of his or her employment and (IV) at the expense of the employer, even if the benefits are not granted in return for work performed.
A bonus is often a sum of money. In that case the first condition is fulfilled. A bonus can also consist of, for example, stock options or the profit premium. In that case, specific rules apply.
The second condition - the employee's right - is rather broad. The right to the cash bonus is sufficient. It is irrelevant whether or not the cash bonus is laid down in the employment contract or a bonus plan. Nor that the bonus is a voluntary payment and that the employee will not automatically be entitled to a bonus in the future.
Also the third condition is broadly interpreted. Social security contributions are not only due on the wages paid in return for the work performed. A premium that is unrelated to the work performed is also subject to social security contributions.
The last condition is the most relevant in this discussion, but also the most complex. Recently, the Belgian social security office (NSSO) changed the description. It seems to be an extension, even though the legislation has not been amended.
THE RECENT POSITION OF THE BELGIAN SOCIAL SECURITY INSTITUTION
A benefit is not only at the expense of the employer when the employer bears the financial costs of the benefit. This can be the case when the employer pays the cash bonus himself, but also when another company passes on the financial cost of the benefit to the actual employer.
But suppose it is not you, but another company within the group, that grants the cash bonus to your employees without presenting the invoice to you. So you do not bear the financial cost of the benefit. Then also social security contributions are due if - says the social security office - ‘the grant is the result of the work performed under the employment contract concluded with that employer or related to the position of the employee with that employer.’
It is in this regard that the Supreme Court of Appeal already clarified matters earlier on. Although the accounting records show that the financial burden of the benefit is borne by a third party and no by the employer, social security contributions are due if the worker can turn to the employer to claim the benefit. This legal claim that the worker has in respect of the employer therefore suffices to ensure that social security contributions are due (Supreme Court of Appeal, 10 October 2016, S.15.0118.N, see www.juridat.be).
The NSSO seems to go a step further and aims at broadening the social security liability. Also if the employer is not the point of contact for the employee, social security contributions are still due. It is not yet clear whether this interpretation will also be followed by the courts. In any case, the legislation has not been broadened.
WAGE COSTS: ALSO THINK OF THE HOLIDAY PAY
When determining the budgets, you must not only take into account the employer's contributions (25% base contribution). As a rule, you will also be due holiday pay on the bonus (of the employee). The single and double holiday pay on ‘variable pay’ amounts to +/- 15.668% of the variable remuneration. In very specific situations no holiday pay is due. We are glad to look into the matter with you.
Are you wondering whether social security contributions are due on a benefit granted or received by you? And what about the holiday pay? Send us your questions on email@example.com.