13th month optimization
Did you know you can optimize the 13th month for your employees - whether you are a small or a large organization?
End-of-year premium or 13th month?
In practice, these are almost synonyms.
An end-of-year bonus is usually equal to gross monthly salary. Hence the term "13th month”. In practice, we usually use both terms. Another reason is that it gets paid out at the end of the year.
This bonus can be paid out in short term options in certain cases.
Want to know more?
What?
The 13th month is a taxable bonus that some employees receive once a year as an extra from their employer. Because the amount is often roughly equivalent to the monthly gross salary, we call it the 13th month.
For whom?
The sector or company defines whether an employee is entitled to such bonus and how it is calculated.
So unfortunately, not every employee gets that 13th month's
salary at the end of the year.
Amount?
The amount depends first of all on the employee’s gross salary, but other factors also play an important role. In fact, every company calculates it differently.
Taxation
The end-of-year premium is considered as salary.
This means that the bonus is subject to social security and withholding tax. Moreover, it is considered as special remuneration, making it subject to higher taxes.
The percentage of withholding
is determined based on the annual amount of the normal gross annual salary and
can be a maximum of 53,50%.
Choice
An employee will need to make his choice whether he wants to receive his 13th month in cash or in options. The sooner this choice takes place, the bigger the budget in options will be since one can only make a choice for the future – not for the past.
If a choice is made in May for example, then only the budget that will be obtained in the seven upcoming months can be paid out in options.
If you have a cafeteria plan in place, it may not be needed to make a choice right away.
Rules
The FOD does not allow all companies to optimize. Therefore the following must be verified:
- Paritair comittee
- Company rules
- Union
may need to be consulted
Addendum
An addendum
to the employment contract is not mandatory but recommended. It states the
framework of the optimization.
Are you considering optimizing
the 13th month for your employees?
Let us know and we’ll check together whether your company is eligible.