Scaleup Vlaanderen
Here's how to optimize your labor costs
Belgium is famous for its high labour costs and automatic salary indexations. Employers also have to live with stringent rules on salary freezes. Despite this difficult context, certain existing benefits or measures can help the employers optimise their salary costs while remaining attractive to employees. Here are a some examples, in our comprehensive short guide to strategic benefits.
One avenue to explore is the collective bonus, also referred to as "bonus CBA no. 90". This bonus can be granted to all employees or to a specific department, on the basis of pre-defined and transparent collective objectives. The collective bonus benefits from a friendly social and tax treatment and is not subject to the salary freeze limitation, which makes it financially more attractive than pure salary or an individual bonus. If the collective bonus does not exceed 3,948 EUR gross per employee (2023) for a full achievement of all targets, the bonus is tax free up to a maximum amount of 3,434 EUR. The employer is liable to a social security contribution (33%) and the employee, to a solidarity contribution (13,07%).
Another lesser-known option is the innovation bonus. This bonus can be granted to the most creative employees, who create new ideas (i.e. on products, services, etc.) for the company. It is equal to the maximum of the gross monthly salary of the employee and can be granted to a maximum of 10% of the employees (or maximum three employees in companies with less than 30 employees). Provided that the conditions are met, this bonus is free from social security contribution and tax and is not subject to the salary freeze limitation.
The rising trend of stock options can also be considered. Although this benefit does not escape the strict salary freeze limitation, it is subject to a favourable tax and social security regime. Provided that certain strict conditions are complied with, the grant of the options will lead to a lump-sum benefit in kind equal to a percentage of the value of the underlying shares, which constitutes a taxable remuneration for the beneficiary. The employer has to withhold the payroll tax due on the said benefit in kind at the time of the grant. The benefit in kind is not subject to social security contributions. Moreover, potential capital gains realised by the employee upon resale of the options, their exercise or the sale of the underlying shares are exempt from taxes and social security contributions.
In the era of remote work, telework allowances can play a significant role. Employers can provide allowances of up to 148.73 EUR net per month to employees who work predominantly from home – equivalent to one full working day per week.
Regarding pension plans, the extralegal pension plan offers several advantages. Employer contributions to an extralegal pension plan are in principle not taxable on the employee (taxation takes place only at the time the extralegal pension capital is withdrawn) and such contributions entail only a combined special social security and tax burden payable by the employer of 13.26%. Specifically, this is 8.86% social security contribution plus 4.4% contribution tax (with an additional 3% above a certain amount considered a deductible expense provided the "80% limit rule" is met (the final annualized pension amount does not exceed 80% of the employee's "normal and periodic" gross annual salary for the last year).
Lastly, new employers can benefit from reduced social security contributions. Indeed new employers can take advantage of a reduction of up to 4,000 EUR from the employer's social security contributions for hiring the first employee. For the second employee, the new employer can benefit from a reduction for thirteen quarters. In total, this reduction amounts to 13,750 EUR (1,550 EUR for five quarters, 1,050 EUR for four quarters and 450 EUR for the following four quarters). From the third to the sixth employee, the new employer can benefit from a maximum reduction of 11,250 EUR (1,050 EUR for nine quarters and 450 EUR for four quarters), with a reference period of twenty quarters for applying the reductions (starting as from the first quarter of the employment).
