As an employer, you can grant a supplement to temporarily unemployed workers. This supplement is paid on top of the unemployment benefits granted by the NEO (ONEm/RVA), the NEO supplement of 5.63 EUR per day and a sectoral supplement (if any) paid by the social security fund or the employer. This does not affect the worker's unemployment benefit.
The supplementary unemployment benefit is exempt from social security contributions. As an employer, however, you must deduct withholding tax at 26.75%.
Social security contributions: Exemption
As a rule, the NSSO accepts an exemption from social security contributions if four conditions are met:
- The worker receives social security benefits (such as unemployment benefits);
- The employer's allowance is a supplement to those social security benefits, as to compensate the loss of the worker's occupational income or the increase in costs;
- The gross amount of that supplement shall not exceed the social security benefit;
- The employer makes no distinction between workers belonging to the same category.
These basic conditions are being criticised for going beyond what the legal text prescribes.
Corona measure: modified condition
The NSSO has announced to be more flexible for employers who have made workers temporary unemployed as a result of the corona measures. They can grant a supplement to the NEO benefit, without having to pay social security contributions on only one condition, i.e. that the sum of the unemployment benefit that the worker will receive and the supplement by the employer may not result in the worker receiving more than he would have received if he had worked. The starting point for this are the gross taxable amounts.
The NSSO only accepts an exemption if all workers of the same category are treated equally. For example, this may be by compensating all workers up to the same percentage of the gross taxable wage or by granting the same fixed amount
Points of attention:
- Take into account the unemployment benefits granted by the NEO, the NEO supplement of 5.63 EUR per day and a sectoral supplement (if any) paid by the social security fund or the employer.
- In the comparison, only take into account the wage subject to ordinary social security contributions (13.07% employee contribution and 25% employer contribution).
- For workers with variable wages, the average wage of the past months may be taken into account, e.g. the past twelve calendar months.
- The final amounts of the unemployment benefit are not known straight away at the end of each month. The NSSO allows the employer to compensate if the supplements granted for the month of March 2020 turn out to be too high, by reducing the supplements for the following months.
Tax treatment: 26.75% withholding tax
A withholding tax of 26.75% is deducted from all temporary unemployment benefits. This applies to the unemployment benefit, the NEO supplement of 5.63 EUR per day, the sectoral supplement, and therefore also to the voluntary supplement granted by the employer.
Make workers aware that the withholding tax on occupational income is nothing more than an advance payment. The supplement will eventually be normally taxed at the progressive rates, just like wages and unemployment benefits. Therefore, it may very well be that the withholding tax is not sufficient to cover the final tax liability. This of course depends on the personal situation of the individual worker.
We help you
Do you have questions about how best to determine the amount of the supplement? A flat-rate gross amount per day or a more individual approach based on the worker's net income? Would it be best to conclude a collective bargaining agreement? Or is a unilateral commitment better suited to your situation? Do not hesitate to send us your questions via firstname.lastname@example.org.