Attracting and retaining talent is a major challenge in today's labour market. Multiple incentives come into play, such as the employer's reputation, training opportunities, career prospects, etc. In addition, it is essential to offer a competitive and flexible salary package, as individuals seek to tailor their benefits to their lifestyle. Whether it's extra days off, access to IT equipment or warrants, employees appreciate choices that meet their needs.
In many sectors, employees receive a bonus at the end of the year, also known as the 13th month. However, taxation on this type of bonus is even higher than on a normal salary. Fortunately, there are ways of optimising this bonus.
Warrants, what are they?
Warrants are financial products (like shares) that give the holder the right to buy another share at a pre-agreed price. Offers of warrants are completely exempt from social security contributions. In reality, they are financial options with a longer life.
The 13th month in cafeteria plans
Historically, some companies have included the 13th month bonus in a cafeteria plan. A cafeteria plan offers employees the opportunity to convert their 13th month budget into various benefits.
However, this approach raised questions of fairness among companies that could not afford the (fairly expensive) implementation of such plans. In response to this problem, the Office for Advance Tax Rulings (FPS Finance) recently decided that, in certain circumstances, employees can optimise their 13th month bonus by means of warrants without necessarily having to set up a cafeteria plan.
13th month in options
As mentioned above, Belgian employees often find that this bonus is greatly reduced because of the high level of Belgian taxation. However, the allocation of warrants represents an advantageous alternative. These warrants are exempt from employer (+/-25%) and employee (+/-13.07%) social security contributions, which is a substantial advantage. The company can decide whether it wishes the amount of exempt employer contributions (+/-25%) to be fully or partially redistributed to employees in order to:
– Minimise company costs as much as possible (-18%)
– Maximise the employee's net income (+41%)
→ The best solution often lies somewhere in between
The use of warrants as part of variable remuneration (bonuses) is not new. But thanks to this recent decision, more and more employers and employees will be able to benefit from this advantage. The first step is to check that the company is eligible, and an appropriate analysis is therefore recommended. Secondly, it is up to the employee to decide whether to receive the 13th month in cash or in warrants.
Ultimately, this is what employees want these days: a flexible, individualised and optimised salary package.
* These are theoretical results assuming that all influencing factors remain equal. The value of the equity option will fluctuate according to the value of the Euro Stoxx 50®, its volatility, the interest rate and the remaining life of the options.
| ➤ You may also be interested in this article: https://www.beci.be/quid-de-la-remuneration-variable-en-fin-de-contrat/ |
About the authors
Marjon Peirens – Client Manager, Optiniti & Christophe Delbecque – Client Manager, Optiniti