1. What is an innovation premium?
The innovation premium is a cash bonus allowing an employer to grant a financial compensation to an employee who proposes innovation with a real added value for the company. This financial compensation is exempt from social security contributions and is not taxable if all legal conditions are met. The paid premiums are moreover considered to be a deductible cost for the employer.
2. Which conditions should be complied with?
To be eligible for the innovation premium the idea must fulfill the following conditions:
- the novelty must represent a real added value in relation to the normal activities of the employer who grants the premium;
- the innovation must not be subject to a prior call for tenders or a request for specifications for the purchase of products or processes addressed by a third party to the party granting the premium; and
- the innovation must be introduced by the employer into his company or be the subject of a prototype, an application for the production of a prototype, or there must be internal instructions confirming the changes the innovation will imply for the normal activities of the company.
The premium itself should fulfill the following cumulative conditions:
- it may not be granted in place of or in conversion of remuneration or benefits in kind under or or addition to the employment contract, irrespective of whether this other benefit is subject to social security contributions;
- the premium may only be granted to employees who are bound by an employment contract to the employer who grants the premium;
- the total sum of the premiums paid during one calendar year does not exceed 1% of the total payroll of the company;
- the premium applies to a maximum of 10% of the number of employees for companies with more than 30 persons (a maximum of three for companies with less than 30 employees);
- no more than ten employees per innovation may benefit from the premium; and
- the amount of premiums paid per employee may not exceed one month’s salary per calendar year.
3. How can an employer grant such innovation premium?
An employer who wishes to grant an innovation premium to an employee, should notify the Minister of Economy of the criteria, procedures, and the project to which the premium pertains. The Act of 3 July 2005 stipulates that this is a mere information duty, but the National Office for Social Security construes this as a requirement that the Federal Public Service for Economy should approve the application.
The employer should also notify the Belgian Office of Social Security of the amounts and the names of the employees who receive such premium in the month following the month in which the premium was granted.
Granting an innovation premium to employees, and on the condition that all conditions are complied with, can be an interesting benefit for both employers and employees. We can provide you further information on this premium upon request.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.