In Belgium, a long-service bonus is free of social security and tax if you grant it at most 2 times per career: from the year of 25 years' service, up to 1 gross monthly salary, and from the year of 35 years' service, up to 2 gross monthly salaries. The law does not require it, but some sectors do.
Is a long-service bonus mandatory in Belgium?
Not under the law. A long-service bonus is mandatory in three cases:
- Your sector requires it. In construction (JC 124), a blue-collar worker is entitled to a fixed bonus after 25 and after 35 years in the same company. Details below.
- You introduced it yourself, through a company agreement, the work rules or the employment contract.
- You have paid it for years under a fixed rule. An employer who gives every employee a month's pay at 25 years' service cannot simply drop it for one person. The employee can rely on that practice.
In all other cases the choice is yours. Many SMEs grant it as recognition, because the bonus is worth as much net to the employee as it costs you.
Long-service bonus at 25 years of service: the conditions
The NSSO does not treat a long-service bonus as pay if you follow these conditions. The tax authorities apply the same conditions and then treat it as an exempt social benefit.
| Condition | First bonus | Second bonus |
|---|---|---|
| At the earliest in the calendar year of | 25 years' service with you | 35 years' service with you |
| Ceiling | 1 x gross monthly salary | 2 x gross monthly salary |
| Form | Cash, in kind or purchase vouchers | Same |
Three details make the difference:
- Twice per career with the same employer, no more. A bonus after 30 years is fine, but it is then the first of the two.
- The gross monthly salary is the normal monthly salary at the time of the award, before social security deductions. Instead, you may use the average gross monthly salary in your company: the previous calendar year's pay divided by the number of full-time equivalents. Pick one method per calendar year for everyone.
- Above the ceiling it is pay. Only the part up to the ceiling is exempt. The rest bears the social security and withholding tax of an ordinary bonus.
If you grant the bonus for a reason other than years of service, such as good performance, or on retirement or the closure of the business, it is not a long-service bonus but pay. So state explicitly in the letter or on the payslip that the bonus rewards years of service.
Worked example: long-service bonus or ordinary bonus?
An office employee earns € 2,600 gross a month and reaches 25 years of service this year. You want to give him an extra month's pay.
| Long-service bonus | Ordinary bonus | |
|---|---|---|
| Gross | € 2,600.00 | € 2,600.00 |
| Employee social security (13.07%) | € 0.00 | € 339.82 |
| Withholding tax (40.38%) | € 0.00 | € 912.66 |
| Net for the employee | € 2,600.00 | € 1,347.52 |
| Employer social security (25%) | € 0.00 | € 650.00 |
| Cost to the employer | € 2,600.00 | € 3,250.00 |
| Deductible as a business expense | No | Yes |
| Cost after corporate tax (25%) | € 2,600.00 | € 2,437.50 |
With the long-service bonus, the employee takes home almost twice as much. For you, the ordinary bonus is slightly cheaper after tax, because you can deduct it. At 35 years' service, the same employee can receive up to € 5,200 exempt. For a bonus for the whole team, compare with a collective agreement 90 wage bonus.
Is a long-service bonus tax deductible?
Not the exempt part. The Income Tax Code excludes social benefits that are exempt for the employee from the employer's business expenses. You therefore pay the bonus out of profit after tax.
The part above the ceiling is taxable pay. That part is deductible, provided you report it on tax form 281.10. If you do not meet the conditions at all, the whole bonus is pay: taxed for the employee and deductible for you.
Long-service bonus by sector: construction, JC 200 and others
Construction (JC 124). A blue-collar worker who reaches 25 years' uninterrupted seniority in the same company receives a one-off € 500 gross. After 35 years it is € 700. He must have worked in the year before that anniversary, and you pay on the day itself or at the latest on the next payday. The sector scheme is supplementary: it applies if your company has no scheme of its own. Both amounts stay below the exemption ceiling. If you add something yourself, count it all together. The other construction rules are in our guide to JC 124.
White-collar staff (JC 200). The supplementary joint committee for white-collar employees has no long-service bonus. Seniority is built into the pay scale, which rises with years of experience. A bonus there is your company's choice. See also our guide to JC 200.
Transport and hospitality. Road haulage (JC 140.03) and hospitality (JC 302) have no one-off long-service bonus. Pay does rise with years of service there: in road haulage through a seniority supplement per hour worked, in hospitality through periodic increases of the minimum wage once the employee has gone through all the experience steps of his pay scale. That is ordinary pay, with social security and withholding tax. Also check company agreements and the current year's sector deals.
How do you count seniority after a takeover or temping?
Takeover. In a transfer of undertaking, the employee keeps his rights against the new employer, including his seniority. In their administrative practice, the NSSO and the tax authorities also accept years with companies in the same group or the same technical business unit. If you count years with a previous employer for the bonus, for example after a takeover, it is not automatically an exempt long-service bonus, though: the NSSO assesses such cases one by one.
Temping. The exemption requires 25 or 35 years in service with you. During his years as a temp, the worker was employed by the agency. If your own scheme counts those years and you pay earlier because of them, the bonus risks becoming pay.
Mistakes employers make
- Calling a retirement bonus a long-service bonus. A leaving bonus is always pay.
- Calculating the ceiling on net pay instead of gross monthly salary.
- Giving a third bonus, for instance after 40 years. That too is pay.
- Forgetting the sector bonus because the employee does not ask for it.
What Business Centrum does for you
We track your employees' years of service in your payroll, flag who reaches 25 or 35 years of service in the coming year and calculate the exempt ceiling. We process the bonus correctly on the payslip and the tax form, together with Acerta.