Compensation and benefits...Compensation and benefits Nadja De Bie Sandra De Weerd 1. Introduction • Road congestion: environmental, social and economic impact • Employers need

Compensation and benefitsNadja De BieSandra De Weerd

1. Introduction

• Road congestion: environmental, social and economic impact

• Employers need to make a difference to attract key talents

• Respect for the work-life balance increases productivity

• Flemish Governmental Agreement: improvement of the work-life balance by encouraging employers to use a regime of flexible working hours and implement a framework for teleworking

• Homework

• Legislation on mobility

• Flex plans

• Employers seek: − solutions for employees− behavioural changes

• Employees seek:− flexibility (as to place and timing of work)− influence on the composition of the salary package

Context

Considerations

Initiatives

Future of WorkPwC 2

Section titleSubtitle

Future of Work – November 2018

Work @ home

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Homework Telework

Employment Agreements Act of 3 July 1978Structural telework: CBA no. 85 of 9 November 2005

(Occasional telework: Act of 5 March 2017 on workable and flexible work)

1. Choice of place of employment by the employee2. Absence of direct supervision by the employer

1. Performing, from another approved work site, activities that could also be carried out on the company site

2. Using information technology 3. On a regular basis

No right, no obligation

A written agreement is required

No application of the provisions on working time, Sunday rest, night work, overtime etc.

Non-discrimination

Compensation for the use of the home accommodation for the purpose of performing professional activities:costs of heating, electricity, telephone, internet, small home office equipment etc.

1. Homework & telework

Homework Telework

Reimbursement of the costs associated with providing the possibility to work from home

• In principle, no financial contribution, unless explicitly provided

• The employer must provide, install and maintain the required equipment

Any private use of equipment = benefit in kind

• The employer covers or reimburses the connection and communication costs

No taxable income & not subject to social security contributions if…

Types of costs

compensation of costs proper to the employer on the basis of expense notes no maximum amounts

lump sum cost allowances next slide

Future of WorkPwC 5

2. Right to compensation

Approved for social security purposes Approved for tax purposes

Office costs

EUR 126.94/monthRegularly working from home or performing structural telework

EUR 127.00/month • Approved by the Rulings Office (home work policy is

required)• Not for all cases and positions (different lump sums for

different positions (‘functions’))• For both structural and regular telework

max. 10% of the gross wage The gross wage is limited to the part that relates to home activities

Purchase of own PC (incl. peripheral equipment and software)

EUR 20.00/month if the employer does not bear (part of) the costs in any other way

EUR 20.00/month • Approved by the Rulings Office (provided no other

compensation of the cost)• Circular no. Ci.RH. 241/661.975 of 16 January 2014• For both structural and regular telework

Use of own internet connection

EUR 20,00/month Substantial and regular use

EUR 20.00/month • Approved by the Rulings Office • Circular no. Ci.RH. 241/661.975 of 16 January 2014• For both structural and regular telework

BYOD – Use of own smartphone / EUR 10.00/month

• Approved by the Rulings Office

BYOD – Use of own tablet / EUR 12.00/month • Approved by the Rulings Office

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3. Lump sum cost allowances

What are the conditions for teleworking?• Seniority?• Responsibilities (for which

departments, projects etc.)?

• Availability of home infrastructure

• Official home address?• Allowed to work from a

friend’s or family member's home?

• Are costs proper to the employer reimbursed in such a case?

• Which types of costs are reimbursed?

• Exceptions (e.g. mandatory presence at the office)

• Work schedule?

• Can the work schedule be adapted?

• Maximum number of days? Differences for different categories of employees?

• Procedure in case of illness?

• Procedure in case of termination?

• Meeting clients at home?

• Overtime?

• Control procedures (timing, achievements etc.)?

• Adaptation of the employment contract?

• Confidentiality?• Work accidents?

Who? Where? How? Control?

4. Guidelines for drafting a policy

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5. Reconsider your teleworking strategy… How can PwC assist?

Review/draft the (addendum to the) employment contract and the telework policy

Submit the homework related expense allowances to an audit

Apply for a tax ruling

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Section titleSubtitle2. Mobility

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80% of all active Belgian employees commute by car

Congestion costs

€ 8Bnper year (2% of GDP)

Pollution costs

€ ~1 790per year, per Belgian gathering the impact on health,

biodiversity, work productivity (1)

Mobility needs

2%Increase of Mobility demand per year

Preferred mean of transport

Car Park

of cars in Belgium (2018/8)

5.8M

+39% +41%Hybrid

(compare to 2017)Electric

(compare to 2017)

Average distance travelled per Belgian (personal car)

14 770 km

Average distance travelled per Belgian (company car)

28 094 km

Company cars

Railways8%

MTB11%

Route81%

19%

1. Why should mobility be on the agenda?

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Mobility budget cash4car

Legal basis • Applicable from 1 March 2019• Act of 17 March 2019, Belgian Official Journal of 29 March 2019• Royal Decree of 21 March 2019, Belgian Official Journal of 29 March 2019• FAQ on mobility budget (see next slide)

Legal basis Applicable from 1 January 2018• Act of 30 March 2018 introducing a mobility allowance – amended by the

Act of 17 March 2019Three implementing decrees:- Royal Decree of 16 November 2018 amending article 19, §2 of social

security related RD (cumulation with travel allowance)- Royal Decree of 16 December 2018 (company car certificate)- Royal Decree of 7 April 2019 (indexation mechanism and repeal of

Royal Decree of 28 February)

Quid?• Budget based upon the TCO of the car can be spent in three pillars• Pillar 1: downgrade to a more eco-friendly car (max. CO2 emission in 2020:

100 gr/km – as from 2021: 95 gr/km)• Pillar 2: alternative and sustainable means of transportation • Pillar 3: balance = cash (at the latest 1 month after reference period)• No mandatory indexation mechanism applies – the employer can allow an

index-linked increase by maximum the ‘normal’ salary index• Changes according to the position held by the employee

Quid?- Receipt of a cash allowance in return for the company car- Allowance equal to 20% (or 24%) x 6/7 x list (= ‘catalogue’) value (based

on art. 36, §2, 2° ITC92) – personal net contribution of employee- As from 1 January 2019: indexation of the list value based on the mobility

index (RD of 7 April 2019)- Changes according to the position held by the employee

2. Mobility budget vs. mobility allowance2.1 Legal basis & definition


https://mobiliteitsbudget.be/nl

2. Mobility budget vs. mobility allowance2.2 FAQ



Employer• Pillar 1: normal corporate tax rules apply for the BIK

related to the new company car + solidarity contribution based on CO2 emission of the new car

• Pillar 2: fully tax deductible – not subject to social security (but included for pension, unemployment income etc.)

• Pillar 3: fully tax deductible – not subject to social security (but included for pension, unemployment income etc.)

Employer• Solidarity contribution based on CO2 emission of

an exchanged car (= 100% tax deductible for the employer)

• The allowance is 75% tax deductible for the employer. If the exchanged car was tax deductible at a higher rate > transitional arrangement: higher % (max. 95%) applies in the first year; from the 2nd calendar year: minus 10% per year until the 75% is reached

• Minimum taxable amount applies: 17% (or 40%) of the taxable amount related to the mobility allowance must be added to disallowed expenses

Employee• Pillar 1: taxed on the lower BIK related to the new

company car • Pillar 2: not subject to social security & not subject

to tax• Pillar 3: 38.07% special social security contribution

– not subject to tax

Employee• Article 33ter ITC92: taxed on 4% of 6/7th of the list

value (minus own net contributions) + a minimum taxable amount applies (EUR 1,340 for tax year 2020)

• No employer/employee social security contributions are due

Except for cumulation with exemption for other means of transportation (indexed EUR 410, assessment year 2019, art. 38, §1, 9° c and §1 in fine ITC), no combination of exemptions is possible

- Public transport & carpooling (art. 38, 9° a, b ITC92)

- Bike allowance (art. 38, 14° a ITC92)

- Provision of bicycle or speed pedelec (art. 38, 14° b ITC92)

- Unless the combination with this employment benefit had already existed for at least 3 months before the regime was applied for and it is maintained

2. Mobility budget vs. mobility allowance2.3 (Para)fiscal treatment


The mobility budget cannot be combined with cash4car

Employer Employee

• The initiative lies with the employer (optional)

• Introduction is possible for the entire company, a specific department or a specific category

• The employer has to provide (before introducing the mobility allowance/budget) at least 1 car to at least 1 employee for a minimum (and uninterrupted) period of 36 months – If the company has not yet existed for 36 months (start-ups): mobility allowance is possible immediately on the condition that the employer provides at least 1 car to at least 1 employee

• The mobility allowance/budget cannot be applied for cars that were linked to a (partial/full) gross salary sacrifice in the past

• The employee has the choice to opt for the mobility allowance/budget (written request to be filed) – only for employees

• Has to be provided a company car, or has to be entitled to drive one according to the employer’s car policy

• In the past 3 years, the employee had to be entitled to/drive a company car for at least 12 months, of which 3 consecutive months before the date of the mobility allowance/budget request (exception for new hires/employees promoted before 1 March 2019) – If the company has not yet existed for 36 months (start-ups), the 3-year condition does not apply but there is a waiting period as the employee must be entitled to/drive a company car for minimum 12 months

• In case the employee has more company cars, he is only entitled to one mobility allowance/budget

2. Mobility budget vs. mobility allowance2.4 Specific conditions and procedure



Pros

• Favourable (para)fiscal treatment

• Cost-neutral to the employer

• Real ‘mobility solution’ that stimulates alternative transport modes, the employee is in the driving seat.

Pros

• Favourable (para)fiscal treatment

• Not budget neutral: total cost of ownership for the employer will decrease

• Easy to implement

Cons

• Only employees who have or are entitled to a company car can benefit from this regime

• Administration (creation, by the employer, of a mobility account, RD of 21 March 2019)

• Specific rules for over-consumption

Cons

• Only employees who have or are entitled to a company car can benefit from this regime

• Financing of transport for professional purposes (pool car?) and for private purposes (including home-work)?

2. Mobility budget vs. mobility allowance2.5 Pros & cons


For social security purposes For tax purposes

Bike allowance

• No social security contributions • Up to max. EUR 0.24/km per km • No limitation as to total amount or number of km • Since January 2017 extended to include the (speed)

pedelec

• Exempt from tax at the level of the employee for max. EUR 0.24/km

• No limitation as to total amount or number of km (home-work & professional)

• For lump sum or real expenses • 100% deductible for the employer• Since assessment year 2018 extended to include the (speed)

pedelec

Company bike

• No social security contributions• For both home-work travel and private travel provided that

the bike is also actually used for home-work travel • Combination of company bike and bike allowance for

home-work travel is possible • Since January 2017 extended to include the (speed) pedelec

• Tax-exempt employment benefit• For home-work travel and private travel provided that, if used

for private travel, the bike is also really used for home-work travel

• 120% deductible for the employer• Combining a company bike with a tax-exempt bike allowance

for home-work traffic is possible• Since assessment year 2018 extended to include the (speed)

pedelec

3. Bike allowance & Company bike

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• Align your mobility strategy with your business objectives while creating a competitive and attractive reward package

• Reconsider the cons and pros of the current legislation on company cars/cash4car versus the mobility budget

• Make the link with a flex plan/‘cafeteria plan’

• Creating a tailor-made mobility approach by making use of innovation and digitalisation

• Enabling tools & technology

• Online tool ‘SmartReward’ created by PwC and AON

• ‘Mobility as a Service’ or ‘MAAS’

• Assist with the integration of MAAS providers in your mobility/flex plan

• Support with administrative and legislative know-how

• Transforming your car policy into a tailor-made but flexible mobility approach

• Assistance with change management and related employee communication

Mobility

MAAS

From strategy...

Technology

… through

execution

4. Reconsider your strategy on mobility... How can PwC assist?


Section titleSubtitle3. Flex Plan


A plan which offers employees the opportunity to compose their own compensation package during a well-defined window (regular occasions)

on an individual basis according to the employees’ own preferences & needs within a predetermined budget & frame

3. Flex Plan3.1 What is a Flex Plan?


Creation Spending

Which traditional pay elements do employees want to convert?

• Salary sacrifice (% of gross salary)

• Bonus

• Holidays

• Company car budget

• End-of-year bonus (“13th month”)

… into a form of benefit/reward that increases their feeling of satisfaction (while benefiting from a social security/tax friendly treatment)?

• Sustainable mobility (bike)

• Mobility

• Multimedia (laptop/tablet for personal use)

• Supplement to family allowance

• ...

3. Flex Plan3.2 Budget creation & budget spending


3. Flex Plan3.3 Rules of the game

Social security: respect any acquired rights

Labour law: respect the hierarchy of the legal sources

Personal tax: respect the taxable moment (vesting) and the applicable tax regime

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• The choice for plan participation and benefit selection is expressed in an individual addendum to the employment contract

• It is possible to obtain upfront certainty on the taxable moment and the taxable value by means of a ruling

• It is important that the plan is in line with the rules that are applied by the social security authorities and by the National Public Department in charge of Employment, Labour and Social Dialogue (FOD WASO/SPF ETCS), without compromising the level of pay as determined by wage scales applicable in the sector


Budget creation

Gross salary (12 x EUR 64.48) 773.71

Holiday pay +59.31

13th month +64.48

Total gross salary 897.50

Social security – employer (27.5% on salary & 13th month) +230.50

Total cost 1,128.00

Determination of total cost to employer

Total cost 1,128.00

Gross to net

Total gross salary (including holiday pay) 897.50

Minus: social security – employee (13.07%) -116.71

Taxable amount 780.9

Minus: Taxes (53.50%) -417.72

Net 363.07

Net value of company bike - lease

TOTAL NET VALUE 1,128.00

Assumptions: home-work distance = 10km; home-work travel using bike = entire year (260 work days, 25 holidays), allowance of 0,24 EUR/km

Cost/net ratio 100%

Increase 211%

<

=

3. Flex Plan3.4 Example: bike allowance


3. Flex Plan3.5 Reconsider your strategy on flexibility... How can PwC assist?


Tax, social security and employment law

expertiseBenefits specialists

Reward strategy Technology

1. Multidisciplinary approach combining (among other things) individual income tax, corporate tax, VAT, employment and social security law as well as project and change management skills

2. Technical expertise in local jurisdictions in order to develop and implement a local version of the flex tool

3. Experience and capabilities from strategy through execution

1. In-depth knowledge and expertise in complex employee benefits administration and brokerage

2. Global delivery based on local specialist knowledge and expertise

3. Dedicated flex and communication teams available in a global organisation while working together with local product owners

4. Integrated platform delivering engagement, administration, analytics and value

3. Flex Plan3.5 Reconsider your strategy on flexibility... How can PwC assist?


Sandra De Weerd Senior Manager

[email protected]+32 473 91 02 83

PwC

Contacts

Nadja De Bie Senior Manager

[email protected]+32 473 91 06 27


© 2019 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

Thank you


3. Flex Plan 3.1 What is a Flex Plan?

A plan which offers employees the opportunity to

compose their own compensation

package

on an individual basis according to the employees’ own preferences & needs

within a predetermined budget & frame

during a well-defined window (regular occasions)


3. Flex Plan 3.2 Budget creation & budget spending

Creation Spending

Which traditional pay elements do I want to convert?

❏ Salary sacrifice (% of gross salary)❏ Bonus ❏ Holidays❏ Company car budget❏ End-of-year bonus (“13th month”)

… into a form of benefit/reward that increases my feeling of satisfaction (while benefiting from a social security/tax friendly treatment)?

❏ Sustainable mobility (bike)❏ Mobility❏ Multimedia (laptop/tablet for personal use)❏ Supplement to family allowance


3. Flex Plan 3.3 Rules of the game

Labour law: respect the hierarchy of the legal sources2

Social security: respect any acquired rights 1

Personal tax: respect the taxable moment (vesting) and the applicable tax regime3

● The choice for plan participation and benefit selection is expressed in an individual addendum to the employment contract

● It is possible to obtain upfront certainty on the taxable moment and the taxable value by means of a ruling ● It is important that the plan is in line with the rules that are applied by the social security authorities and by the

National Public Department in charge of Employment, Labour and Social Dialogue (FOD WASO/SPF ETCS), without compromising the level of pay as determined by wage scales applicable in the sector


3. Flex Plan 3.3 Example: bike allowance

Budget creation

Gross salary (12 x EUR 64.48) 773.71

Holiday pay +59.31

13th month +64.48

Total gross salary 897.50

Social security - employer (27.5% on salary & 13th month) +230.50

Total cost 1,128.00

Determination of total cost to employer

Total cost 1,128.00

Cost/net ratio 100%

Gross to net

Total gross salary (including holiday pay) 897.50

Minus: social security - employee (13.07%) -116.71

Taxable amount 780.9

Minus: Taxes (53.50%) -417.72

Net 363.07

Net value of company bike - lease

TOTAL NET VALUE 1,128.00

Stijging 211%

Assumptions: home-work distance = 10km; home-work travel using bike = entire year (260 work days, 25 holidays)


3. Flex Plan 3.4 Reconsider your strategy on flexibility... How can PwC assist?

1. Multidisciplinary approach combining (among other things) individual income tax, corporate tax, VAT, employment and social security law as well as project and change management skills

2. Technical expertise in local jurisdictions in order to develop and implement a local version of the flex tool

3. Experience and capabilities from strategy through execution

1. In-depth knowledge and expertise in complex employee benefits administration and brokerage

2. Global delivery based on local specialist knowledge and expertise

3. Dedicated flex and communication teams available in a global organisation while working together with local product owners

4. Integrated platform delivering engagement, administration, analytics and value

Technology

Tax, social security and employment law expertise

Reward strategy

Benefits specialists


3. Flex Plan 3.4 Reconsider your strategy on flexibility... How can PwC assist?

Documents

Compensation and benefits...Compensation and benefits Nadja De Bie Sandra De Weerd 1. Introduction • Road congestion: environmental, social and economic impact • Employers need