Context

Early retirement schemes of the so-called “bridging pension” type are governed by collective labour agreements (CLA’s). Allowances paid in accordance with such schemes to supplement unemployment benefits are subject to decreased special social security contributions.

It is interesting to note that where the former employer decided to pay such supplementary allowances outside the scope of a CLA-regulated bridging pension scheme, hence without there being any statutory obligation, these “voluntary” allowances were not subject to social security contributions.

News

There is every indication now that the exemption from social security contributions for these “voluntary” allowances is about to come to an end. Indeed the Programme Law has been passed that introduces a legal framework based on which some of these allowances can be considered as “remuneration” (earned income) within the meaning of social security legislation. In addition, other allowances that would not be considered as remuneration could still be made subject to specific social security contributions.

The allowances will be classified based on criteria such as the beneficiary’s age, the amount of the allowance or the instrument (statute, collective agreement, unilateral commitment of the employer) in accordance with which they are paid.

Where the allowances are classified as remuneration, they will become subject to ordinary social security contributions (employer’s share: 35%; employee’s share: 13.07%). As we have said, even the allowances that do not qualify as remuneration could be made subject to specific social security contributions (to be borne by the payer and/or the beneficiary)

The new rules will be applicable to “voluntary” allowances whose first payment starts on or after the entry into force of the implementing Royal Decree; they will not be applicable to allowances whose first payment was made prior to said entry into force.

As of today, the timing of enactment of these Royal Decrees is still unknown.