Bonus as additional reward for performance

More and more companies are paying their employees a bonus as a form of extra reward. In fact, our survey figures show that the average bonus amount has risen to 6,000 euros this year, an all-time record. Why exactly is this form of flexible pay so ‘rewarding’? Employers can decide whether or not to award this bonus - individually or collectively - AND they get to review their decision every year. For employees, getting a bonus is an extra motivation boost. In times of labour shortages, flexible pay is a great way to stand out as an employer.

As a company, you can go for an individual bonus or a collective bonus. What we are seeing is that companies are slightly more likely to opt for collective bonuses.

• The non-recurring CA090 bonus

This bonus is the most popular: it is a result-related bonus for the whole company or for a particular division. There are concrete targets in place that need to be achieved and that are agreed in advance. In doing so, there is transparency and everyone gets the same. Moreover, the bonus is free of withholding tax. The maximum amount is capped by the government though (3,948 euros gross maximum in 2023).

• Profit bonus

You award all employees in the organisation some or all of the profits in any given financial year in the form of a bonus. The employer gets to award the same bonus to everyone or vary a the amount based on objective criteria such as position, length of service, qualification, etc. This collective bonus system also attracts a favourable tax regime whereby employees pay just 7% in tax over the profit bonus. This bonus does depend on the annual results and can be awarded only when the company turns a profit.

• Gross bonus:

A gross bonus is the traditional way to pay out individual bonuses. The employer decides the criteria based on which he is paying a gross bonus. And the amount of the bonus can also be freely chosen. Out of all the bonus forms, the ratio between wage cost and take-home amount for the employee is the highest though, as this bonus is fully subject to social security contributions and exceptional withholding tax.

• Warrants

Warrants are a form of stock options whereby the employee gets to purchase the underlying value of listed shares at a predetermined price. The employee can sell the warrants the very day after the purchase, thereby limiting the stock market risk. Warrants are exempt from social security contributions but subject to exceptional withholding tax. This type of bonus is also gaining traction among SMEs as it involves little costs for the employer.