6 smart ways to reward your employees with fringe benefits

Cash bonus

The cash bonus is a variable bonus that is awarded via the traditional salary. It is not actually a real remuneration system, as the bonus is not subject to any rules and there are no award regulations: you decide which employees receive a cash bonus and you do not have to justify this to the tax authorities. However, this freedom comes at a high price, as the bonus is taxed in the same way as traditional gross salary. The difference between the gross bonus and the final net benefit can therefore be as much as 66%. This is therefore not a smart way of paying variable remuneration.

Salary bonus

The system of non-recurring, performance-related salary bonuses is a tax-friendly way of granting additional remuneration to all your employees or to a subgroup. However, this subgroup must be very objectively defined, as it will be checked very strictly during audits. The bonus must be linked to the achievement of objectively measurable, collective objectives.

If these are achieved, every employee is entitled to the same wage bonus. This system has favourable final taxation, as your employees do not pay personal income tax on this bonus, only social security contributions. In addition, as an employer, you also pay a reduced 33% social security contribution instead of 35%. The difference between the gross bonus and the final net benefit can be as much as 35%.

However, this method of variable remuneration involves a complex application procedure. As the organiser, you can expect a lead time of six months on average before you receive confirmation of acceptance by the various services involved. Furthermore, a wage bonus is limited to €3,948 gross (in 2023) per employee per calendar year.

Group insurance bonus plan

Another, even more tax-friendly way to reward your employees for achieving certain objectives is the bonus plan. You can introduce a bonus plan for all your employees or, as with the wage bonus, for a specific subgroup. In addition, the bonus to be earned can vary per employee based on measurable, specific targets. The targets themselves can also vary per employee.

This bonus plan allows you to build up a supplementary pension for your employees. The bonus is paid out upon retirement, but your employees can also use these savings reserves earlier for real estate projects. A bonus plan is attractive from a tax perspective, as the difference between the gross bonus and the final net benefit is only around 25%. However, setting up a bonus plan requires the necessary expertise. It is crucial to set up this plan correctly, taking into account all the rules.

Health plan

Healthcare costs are rising every year. A health plan for your employees can therefore be an attractive form of fringe benefit. The best known is (collective) hospitalisation insurance, which protects your employees against medical costs associated with hospitalisation and its consequences.

However, more and more employers are going a step further and offering their employees a “medical budget” to cover a wide range of medical expenses outside the hospital (medicines, glasses, doctor's visits, physiotherapy and even dental care). Your employees save on their net expenses and enjoy peace of mind. As an employer, you can also deduct the premium as a business expense. This is a particularly attractive fringe benefit for both parties.

Group insurance

Group insurance is a tax-efficient supplement to your employees' salaries and is considered by them to be one of the most valuable forms of fringe benefits. Group insurance allows you to build up additional pension capital, but also offers your employees a better social safety net during periods of incapacity for work and in the event of death. The capital saved is paid out upon retirement, but your employees can also use these savings reserves earlier for real estate financing.

Group insurance is an indispensable part of any modern remuneration policy, with very favourable tax treatment for both you as an employer and your employees. The premium, including 4.4% insurance tax, is fully deductible for the company. You only pay 8.86% social security contributions on part of the premium, and the final tax for your employee is also particularly favourable (around 16%). This represents a very attractive gross-net benefit.

Individual Pension Commitment for Salaried Employees (IPL)

If, as an employer, you have a collective group insurance policy for all your employees, you can occasionally and on a non-systematic basis grant an employee an additional pension commitment that is recurrent for him or her.

This additional pension commitment (IPL) is tax-deductible for the company up to a maximum of £2,860 per year (in 2023) and is subject to the same favourable tax treatment as the (collective) group insurance. This again results in a unique gross-net ratio.