Adjusted calculation method for profit premiums

Written by Bart Elias 19 December 2018


On 6 December, the Chamber approved the Act holding several employment provisions. One of the chapters of this Act adjusts the system of profit premiums, by introducing the possibility of a pro rata calculation in this respect.

Background: the profit premium

The system of profit premiums entered into force on 1 January 2018 and enables employers to have their employees participate in the company’s profit, in a tax and social security friendly way, without them participating in the capital of the company.

An employer that wished to introduce profit premiums within the company can choose between two types of profit premiums: “the identical profit premium” – i.e. a premium of the same amount or the same percentage of the salary for all employees – or “the categorised profit premium – i.e. a premium whose amount varies based on e.g. seniority, position, salary level … The total amount of the premiums paid out, to be determined at the end of the accounting year, cannot exceed 30% of the company’s total gross payroll.

New pro rata calculation method

In its current wording, the profit premium provisions only contain the possibility to prorate a profit premium in case of voluntary suspension or termination of the employment agreement. This means that, e.g. for a part-time employee, it is not possible to calculate a profit premium pro rata the employee’s actual employment percentage.

The above mentioned Act holding several employment provisions remedies this limitation by including the possibility for the employer to prorate the profit premium based on the employee’s actual performance during the closed accounting year. The employer is not obliged to apply such pro rata calculation.

However, if an employer opts to apply the pro rata calculation method, the following periods of suspension of the employment agreement will have to be equalised with periods of employment:

  • periods of suspension of the employment agreement with retention of salary (e.g. holiday periods);
  • periods of maternity -, paternity -, adoption -, and foster parent leave;
  • periods of incapacity for work due to illness, industrial accident or occupational illness, during which the employee is entitled to guaranteed salary at charge of the employer.

Further, the Act holding several employment provisions also included the possibility – again, not the obligation – for an employer to exclude two categories of employees from the profit premium:

  • employees who were dismissed for serious cause during the last closed accounting year;
  • employees who resigned during said period, with the exception of resignation for serious cause on the part of the employer.

Entry into force

The above mentioned changes will enter into force on the first day of the month following publication in the Belgian Official Gazette. We expect such publication to still take place in December and consequently these new provisions will most likely enter into force on 1 January 2019.

Action points

Companies whose accounting year coincides with the calendar year and that – as from 1 January 2019 – would like to allocate a profit premiums based on the 2018 profit, can take into account the above mentioned new calculation method in order to prorate the profit premium in function of the employees’ actual employment activity during the year 2018.

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