According to article 2 of the Salary Protection Act any amount or benefit that is granted to an employee at charge of the employer as the counterpart for work performed in execution of the employment agreement should be considered as salary on which social security contributions are due. A contrario, this means that in principle no social security contributions should be due if certain benefits are granted indirectly to the employees, i.e. via third-parties without the employer’s intervention and that these benefits could not qualify as being granted as counterpart of the work performed in execution of the employment agreement.
In the “Administrative Instructions” published by the National Social Security Office (hereafter ‘NSSO’), during the third quarter of 2018 the Belgian social security authorities strengthened their position about the notion “at charge of the employer”. According to the NSSO social security contributions will be due when a benefit is granted to the employee by a third-party as a counterpart for the work agreed upon in the employment agreement. Consequently, social security contributions will be due as soon as the attribution of a benefit is a reward for work performed in execution of the employment contract.
It remained unclear whether this strict interpretation would also be confirmed in case law, until the Court of Cassation ruled in this matter by its judgement of 20 May 2019.
The Court of Cassation aligned its existing case law – in which it states that social security contributions are due on benefits that are granted as counterpart of work performed in execution of the employment agreement between employer and employee – with the new/stricter interpretation of the NSSO.
Consequently, the Court of Cassation reinforces the position of the NSSO. Social security contributions should be due on every benefit that can be considered as a reward for work performed in execution of the employment agreement, even without the direct employers’ intervention. In the case at hand, it concerned employees employed by an entity operating in the perfume industry and charged with selling of products of a certain brand. The brand, who is a client of the employer, paid premiums to the employees based on sales of this product. The said premiums were qualified by the Labour Court as salary paid as a counterpart for the execution by the employee of the employment agreement. The Court of Cassation ruled that the decision of the Labour Court was legal and confirmed the judgement.
Given the above, we recommend being very careful when assessing the nature of the benefits granted to employees, even if awarded by third parties not directly involved as a party to the employment contract.
EY Law would be happy to assist you in assessing the potential risks involved.