An employer may decide to grant certain supplements to a social benefit. This supplement is then not considered as remuneration. This means that extra-legal child benefit is exempt from social security contributions.
Supplement to a social benefit
In the case of certain events, an employee’s expenses may increase or he may experience a loss of income. This is particularly the case when the employee’s family grows. This ‘risk’ covered by social security entitles him to child benefits.
The employer may decide to pay a supplement to these child benefits to compensate for the increased expenses related to the birth and upbringing of a child. In this case, extra-legal child benefits are exempt from social security contributions. Of course, this supplement must be reserved for employees with children who are eligible for child benefits.
Ruling of the Court of Cassation
On 25 March 2019, the Court of Cassation ruled that when extra-legal child benefits are granted in exchange for a reduction in the employee's remuneration (salary sacrifice), these extra-legal family benefits do not compensate for the increase in child-related expenses. As a result, they cannot be regarded as excluded from the remuneration, even if the employee receives a higher net amount than he would have received without this benefit.
Position of the NSSO
Following this ruling, the NSSO followed the position of the Court of Cassation and also considered that ‘a supplement to the child benefits to compensate for a reduction in remuneration or granted within the framework of a remuneration optimisation system, such as a cafeteria plan, does not meet these conditions’.
The NSSO made this clarification in its administrative instructions on 1 March 2020. As from the publication of this position, employers can no longer set up a cafeteria plan containing this benefit.
For employers who had already set up a cafeteria plan with extra-legal child benefits and for which the employees had made their choice before 1 March, the NSSO accepted that this benefit would continue to be granted until the next choice is made.
However, the NSSO has specified that no more extra-legal child benefits can be granted within the framework of a cafeteria plan from 1 October 2020, even if the choice of the employee was made before 1 March 2020. From 1 October, extra-legal child benefits granted without complying with the instructions of the NSSO will be considered as remuneration and therefore be subject to contributions.
Extra-legal child benefits outside of a cafeteria plan?
Do you grant extra-legal child benefits to your employees outside of a cafeteria plan? Didn't your workers have to compensate for this benefit with an element of their remuneration? For you, nothing changes on 1 October. This benefit remains exempt if you comply with the instructions of the NSSO.
Source: Instructions from the NSSO - Supplements to social benefits.