Jeroen Bouwsma
01 Oct 2018
The recently published Administrative Instructions for the third quarter of 2018 show that the National Social Security Office (NSSO) provides an expanded interpretation of the concept of 'wages' for the levying of social security contributions. The NSSO fills in the term 'at charge of the employer' more broadly. Advantages that are awarded by a third party, which is not the employer, directly to employees, without any intervention of the employer, can nevertheless be regarded by the NSSO as wages.
Hereinafter we outline the terms 'wages', 'at charge of the employer' and the consequences of the extended interpretation.
The concept 'wages' is defined and interpreted differently in Belgian law. Tax law and labour law do not have the same meaning for 'wages'. But 'wages' is not unambiguously defined within labour law itself.
For example, the Employment Contracts Act of 3 July 1978 does not define the concept of wages. The Wages Protection Act of 12 April 1965 does, but this description only has significance for the Wage Protection Act itself and the legislation that refers to it, including the legislation on social security (Royal Decree of 28 November 1969 implementing the Act of 27 June 1969 on the revision of the Decree Act of 28 December 1944 concerning the social security of the workers).
In general, wages can be described as: every benefit in cash or that can be valued in cash:
In most cases, there will be no doubt as to when an assigned benefit concerns wages and thus social security contributions are due.
But what if, for example, a cash-valued benefit (eg. stock options) is granted by a parent company to employees of a subsidiary, without any (financial) intervention by the subsidiary-employer?
The term 'at charge of the employer' is not defined in the law, so that we must necessarily fall back on the interpretation of it by the jurisprudence.
According to the case-law of the Court of Cassation, a benefit, that is granted directly to the employees of the subsidiary-employer and financially borne by the parent company, is considered to be at charge of the subsidiary-employer if the employees can demand payment of the benefit from the subsidiary-employer on the basis of their terms of employment (for example, because the granting of the benefit is included in the employment contract).
Until recently, this was also the position of the NSSO.
The NSSO now gives a broader interpretation to the indirect receipt of a benefit at charge of the employer and states that it is sufficient that the grant of the benefit is the result of the services provided in the context of the employment contract concluded with that employer or is related to the employee's position with that employer to be qualified as wages.
The employer therefore no longer must formally be the point of contact to which the employee must turn if he does not receive the benefit so that the benefit would be regarded as wages.
In our example, the benefit granted by a parent company to the employees of the subsidiary-employer will be regarded as wages by the NSSO if:
The broadened interpretation of the term 'at charge of the employer' poses the risk that all benefits granted to an employee, regardless of the capacity of the entity that grants or financially bears the benefits, will always be regarded as wages by the NSSO.
After all, the granting of benefits is almost always related to the employee's employment with the employer concerned and will therefore almost always be awarded in consideration of the work performed or is at least related to the employee’s position with the employer.
In other words, in cases where a parent company grants a benefit to the employees of its subsidiary(-employer), it will usually do so only because the employees are employed by the subsidiary(-employer). Under the broadened interpretation by the NSSO of the concept “at charge of the employer”, such granted benefits will be considered as wages and are thus subject to social security contributions.
The question arises whether this broad interpretation of the concept "at charge of the employer" can be maintained in the future and whether jurisprudence will not blow the whistle on the NSSO.
In the meantime, however, it is advisable, with respect to the 'indirect' allocation of benefits, to always check whether the granted benefit should be regarded as wages and thus Belgian social security contributions are due.