A bonus is subject to social security contributions when it is granted by the employer. This could lead to the conclusion that there are no social security contributions to be paid for bonuses paid by a third party - for example by another company - to an employee within your company. In response to this practice, the NSSO tightened the administrative interpretation on this matter from the third quarter of 2018 onwards. The Court of Cassation partly confirms the NSSO's interpretation: a benefit in return for work is always borne by the employer, whether it is paid by your own company or a third party.
Social security contributions: four conditions
Social security contributions are due for the gross wages of the employee. This concerns both the fixed monthly wages and the variable remuneration. The term 'wages' must be understood as defined by the Wage Protection Act. These are:
- (I) wages in cash, or benefits valuable in cash terms
- (II) to which the employee is entitled
- (III) as a result of his employment
- and (IV) borne by the employer, even if the benefits are not granted in return for work performed.
I. 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 a profit premium. In that case, specific rules apply.
II. 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. It is also irrelevant whether it regards a one-off bonus or a multi-year bonus plan.
III. 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.
IV. The fourth condition is the most relevant in the discussion about social security contributions, but also the most complex. As from the third quarter of 2018, the NSSO has adapted the interpretation of this condition. The NSSO adopted a broader wage concept after a ruling of the Labour Court in Brussels. However, there was a lot of discussion as to whether the changed interpretation of the NSSO was justified. The Court of Cassation confirmed the ruling of the Labour Court in a judgement of 20 May 2019. The NSSO will therefore feel encouraged in its position.
Almost always borne by the employer
What does this mean in practice for you as an employer? You finance the benefits you offer to your employees yourself. So both when you pay out the cash bonus yourself, and 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. 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.’ The NSSO took up this position after a ruling of the Labour Court in Brussels. The legal text itself has not been amended.
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 employee can turn to the employer to claim the benefit. This legal claim that the employee 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 Court of Cassation is going one step further now and confirms the ruling of the Labour Court (Court of Cassation, 20 May 2019, S.18.0063, available on www.juridat.be). If the bonus is granted in return for work performed by the employee under the employment contract, the employee is by definition entitled to it at the expense of the employer. So in that case the employee is then legally entitled to the bonus and social security contributions are due. This is not affected by the fact that a third party bears the financial burden or is responsible for the actual payment.
The NSSO also claims contributions if the granting of the benefit is related to the employee's position with the employer. The Court of Cassation has not ruled on this criterion.
Wage cost: 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 wages amounts to 15.668%. In very specific situations no holiday pay is due.
Alternatives for the cash bonus
Are you looking for alternatives to a cash bonus? Be sure to check out our webinar "Motivating and rewarding employees" via this link.
Questions about social security contributions, and when they are due or not? And what about the holiday pay? Send us your questions on firstname.lastname@example.org.