The “Summer” agreement & the attractive profit premium for your employees

The “Summer” agreement & the attractive profit premium for your employees

By tradition a Programme Act was published in the Belgian Official Gazette at the end of last year. This Act implemented – in the middle of winter – a number of measures that were the subject of the federal government's Summer Agreement.

One of the interesting measures of these new laws relates to the possibility to award personnel a beneficial “profit premium”.

What?

The profit premium replaces the existing (slow and little used) system of participation in the profit through a participation plan. The profit premium should not be confused with the non-recurrent result-based bonus based on collective bargaining agreement no. 90. This possibility continues to exist and allows a bonus to be awarded in a (para)fiscal friendly way based on predetermined collective objectives.

The profit premium makes it possible to award a premium – a certain amount or a percentage of the pay - in a relatively simple and flexible way, without it entitling the employee to a right to vote in the company.

The profit premium came into effect on 1 January 2018. The profit premium can be awarded for the first time based on the profit of the financial year with the closing date at the earliest on 30 September 2017.

Terms & conditions and maximum

The profit premium must always be awarded collectively. Either an identical amount or percentage is provided for all employees (identical profit premium), or a distinction can be made per category of employees (categorised profit premium). In the latter case, the implementation is slightly more complex (see below).

The total amount of the profit premiums should not be more than 30% of the total gross pay of the financial year. A profit premium may not be implemented either as a replacement or conversion of pay, premiums, benefits in kind or any other benefit or a supplement thereof.

Implementation

The identical profit premium can simply be implemented following a resolution of the general meeting with a simple majority of votes. The minutes of the general meeting must include a number of specifications, such as the identical amount or the identical percentage of the pay that will be awarded to all employees.

A categorised profit premium needs to be implemented via the existing procedure for the implementation of a participation plan. If there is a trade union delegation, the implementation is done through a collective bargaining agreement. If there is no trade union delegation in the company, it can be implemented by a collective bargaining agreement or a deed of accession (employer’s choice).

Favourable system in terms of taxes and social security

Only a special solidarity contribution of 13.07% on the profit premium is owed by the employee. No employer's contributions are owed on the profit premium. The employee owes a special levy of 7% in full discharge of liabilities on the profit premium. On the part of the employer, the profit premium is taxed as part of the profit and therefore it is not a deductible cost.

The profit premium is not considered as pay, which means it does not have to be included in the basis of the calculation of the redundancy payment. Nor is any holiday pay owed on it. The initiative to award a profit premium is always up to the employer.

For more information about this specific subject, please contact Sébastien van Damme (author) and Sara Cockx (author and unit head).