Profit premium: Renaissance of the employees’ participation in company profits

The Michel government’s summer agreement announced a new regime of employees’ participation in company profits as from 1 January 2018. This has now been confirmed!

The programme act of 25 December 2017 has created a legal framework for the ‘profit premium’ by modifying the law of 22 May 2001 on employee participation in company capital and profit. You can from now on grant all or part of your company’s profits to your employees without them being obliged to participate in the capital. The procedure is simplified, the costs for the employer are limited and the employees will take home a higher net amount than if they were granted a classic bonus. The objective is simple: allow to compensate the employees by granting them part (or all) of the profits.

Rules of play

A profit premium must be granted in cash, is voluntary (no obligation), non-recurring and must be proposed collectively to all employees of the company (company managers are excluded and a seniority condition of maximum 1 year can be imposed). The premium can also be calculated ‘pro rata temporis’ when the contract is terminated or suspended voluntarily.

The law determines two types of profit premiums: the identical premium and the categorized premium. The identical premiums are profit premiums of which the amount is identical for all employees or of which the amount corresponds to a percentage that is equal to the employees’ wages. The categorized premiums are profit premiums of which the amount depends on objective criteria defined by law.

The procedure to introduce profit premiums is simple but is different for identical and categorized premiums. For the identical profit premiums, a decision of the general assembly and company-level information are sufficient. For the categorized profit premiums, a specific collective bargaining agreement must be concluded, or, in the absence of a trade union delegation, an opt-in agreement must be concluded, observing specific rules and mandatory information.

The profit premium is not taken into account for the calculation of the wage standard and is not considered as a remuneration as defined by the employment contracts act.

Two other important remarks:

• The profit premium is an addition to the existing wage package. You cannot replace an existing wage component by the new premium.
• The amount of the profit premium may not exceed 30 % of the wage bill.

Favourable tax and parafiscal regime

The granting of a profit premium enjoys a favourable tax and parafiscal regime:

• Employee's social security contribution: 13.07 % (no employer contribution)
• Employee taxation in the form of a deduction of withholding tax: 7 % (15 % when the premium is granted as part of an investment savings scheme)

Entry into force

The new profit benefits scheme entered into force on 1 January 2018 on the basis of the profits of the fiscal years closed not earlier than 30 September 2017.

Comparative example

In the example below, we compare the tax and parafiscal treatment of the profit premium with two other forms of remuneration: the classic bonus and the bonus granted under the CBA No 90. The gross amount of the bonus paid to the employee is 500 EUR.

On the basis of the above figures about the ratio between the costs for the employer and the net amount of the bonus/premium, it is clear that choosing the profit premium and/or a bonus CBA No 90 is the most interesting option.

Note however that granting a bonus CBA No 90 is highly regulated with regard to the introduction procedure, the maximum amount, the objectives to which the bonus is linked, … Granting a profit premium is less rigid in this regard, which can be an argument for introducing this.

Should you have any questions or if you prefer a ‘customized’ approach, please contact our experts via legalpartners@partena.be.

Source: Programme act (1) of 25 December 2017, articles 45 et seq., Belgian Official Gazette, 29 December 2017.

Author: Isabelle Caluwaerts, Peggy Criel and Yves Stox

11/01/2018