Benefits for your employees: bonus or pay raise?

When giving an employee a pay raise, your labour costs are going to increase substantially relative to your employee’s new net outcome. The WKR may offer a solution.

Salary increase has fiscal disadvantages

A salary increase of 100 euros net quickly results in additional employer costs of 150 euros for income taxes, pension premiums, etc. Consequently, this cumulates to a total of 250 euros in extra costs: 150 percent on top of the net payment.

Moreover, a salary increase can have unintended side effects as the employee’s healthcare or housing allowance may be cut.

Does the WKR offer a solution?

Yes. You may allocate up to 2.400 euros per employee per year to the discretionary scope, without additional requirements. The Tax Administration considers this customary if this amount not exceeded.

Giving out a bonus can be much more fiscally beneficial.

Especially when there’s enough room left within the discretionary scope, a monthly or annual bonus is more fiscally interesting than a net salary increase. However, this cannot replace, for example, mandatory increases when bound by a collective labour agreement.

But, even if you have exceeded your discretionary scope, a bonus is a reasonably inexpensive solution. If the discretionary scope is exceeded, the employer must pay an 80 percent final levy over the exceeding amount, which may still be more fiscally attractive than grossing up. Grossing up those 100 euros net, costs the employer an extra 150 euros in employer costs, while an 80 percent final levy only results in 80 euros employer costs. Additionally, a bonus from the WKR does not count towards an employee’s annual fiscal income, on which the Tax Administration base their assessment for providing healthcare and housing allowances. This way, you also avoid unpleasant side effects for your employee.

Sign up for our Newsletter

Do you reimburse working from home?

Many people work from home regularly. This results in extra costs for the employee for coffee, tea, heating, electricity, and even extra toilet paper, as these products are normally consumed at the workplace instead of at home. As an employer, you are allowed to provide employees with a work-from-home allowance for up to 2,45 euros per day worked from home. These costs are specifically exempt.

Besides this, employees can also invest in improving their home office setup. You may provide reimbursements based on invoices for setting up an ergonomic home office, within reason. Examples include costs made for an adjustable chair, desk, second monitor, mouse, and keyboard. On the other hand, instead of a reimbursement, you can also choose to provide these items to employees. Please note, reimbursing costs without a receipt/ invoice cannot be categorised as specifically exempt.