Bonuses increasingly part of employees’ pay packet

Much has been written about bonuses for senior executives. Now, however, it seems that an increasing number of administrative support functions are also entitled to a bonus. This growth is largely a result of the collective labour agreement of 20 December 2007 concerning non-recurrent result-based bonuses, also called the CAO 90. Bonuses that meet the conditions of this CLA, the most important of which is that the bonuses must be linked to the collective instead of the individual performance, are subject to a favourable (para)fiscal regime. Hudson’s Generic Salary Survey reveals that in 2009 only 5% of administrative support functions were entitled to variable remuneration under the CAO 90 system. By 2011 this had risen to 20% and by 2014 to 40% even.

Vlerick Business School, Hudson and Claeys & Engels joined forces to conduct a specific study of CAO 90 using this finding as the starting point. This study is unique of its kind and, thanks to the partnership, 459 companies participated in the survey.

First of all, we notice that the most important motives for introducing a CAO 90-type bonus system are to encourage the achievement of the company objectives (31%) and (para)fiscal optimisation (29%).

Maarten Simon (a lawyer at Claeys & Engels) warns against too strong a focus on wage cost optimisation: “Just like the advantageous taxation of company cars has led to there being more company cars on the road in Belgium than anywhere else in the world, legislators are now promoting one specific type of bonus. This should give pause for thought, however, because collective bonuses do not work for every position.”

A second important finding from the study is that companies are not happy about the administration associated with (the implementation of) a CAO 90-type bonus system (33% is satisfied) and the internal systems (34%) required for this. The greatest failing of CAO 90, however, is the lack of possibility for individual differentiation.

Bert De Greve, Associate Director of Hudson’s Organizational Talent Department, thinks the next government should tackle this. “There is clearly a trend towards more flexibility in the pay packet, in order to better control the wage bill and create more levers to enable differentiation between good, excellent and less good performers. Variable remuneration should definitely be taxed less, both collectively and individually.”

The third conclusion relates to the criteria used to determine the bonus. In 47% of the plans for administrative support functions, financial criteria such as profitability and/or turnover are used. For plans aimed at blue collar workers the picture is somewhat more nuanced: financial criteria are taken into consideration in 31% of cases, followed by safety (19%) and productivity (15%).

Xavier Baeten, partner and remuneration specialist at Vlerick Business School, finds that companies do not sufficiently use the CAO 90 system as an instrument for strategic rewards: “Too little use is made of strategic criteria such as innovation, customer satisfaction and sustainability. Moreover, as many as 86% of the companies apply only local branch level criteria and/or those of the company as a whole for administrative support functions. And yet it is so important to bring the objectives close enough to the employees, and to go down to team level.”

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