Executive remuneration: Now and in the Future
It is not clear how much importance executives attach to their compensation packages; what is clear, however, is that the average executive spends little time in thinking about his personal status within the company he is managing, for the simple reason that he is constantly solving the company’s problems and those of the people working for it. In many cases, compensation packages are not in line with the roles and responsibilities assumed, either.
It is also self-evident that it is in the interests of a company that operates in a competitive market to position itself there as the employer of choice. With a view to recruiting and retaining the best high-level professionals, the company must ensure that it can offer a well-balanced remuneration and benefits package that has a high cash component but is also attractively variegated, including a number of innovative elements such as a flexible reward scheme, enabling the individual to make choices according to what is referred to as a “cafeteria concept”.
Consequently, executive remuneration is a key factor in an HR strategy, and may play a decisive role in the company’s development and profitability by providing incentives to key executives and top management.
- top managers
- CEOs, managing directors, members of executive committees, etc.
- directors
The base salary often contains a number of fringe benefits and allowances. Experience has shown that obvious opportunities to make the package more attractive are often not taken advantage of. We focus on four types of “optimisation routes” that can be considered and that comply with the relevant legal provisions.
The four optimisation routes:
- optimising the existing compensation package from a tax and a social security viewpoint, without changing the executive’s worker status in any manner whatsoever;
- taking advantage of the fact an executive has international responsibilities;
- applying the rules governing self-employed persons for social security purposes (instead of treating the executive as an employee);
- operating via a management company.
Many cases allow a variety of routes to be mixed, all leading to an increase in net earned income for the executive and/or a cost reduction for the company.
Concluding observations
In spite of the stringent provisions of Belgian law, a number of routes are open that, provided they correspond with reality and are properly supported by contracts, can lead to major cost savings for companies and a considerable increase in net disposable income for executives. However, each case requires profound analysis and careful implementation based on meticulous preparation and must not be approached offhandedly.
This is an area that is also subject to constant change and therefore should be closely monitored. In this respect, we refer to the Corporate Governance Act briefly mentioned above, the bill intended to combat sham self-employment, and the transparency obligation that requires that activity reports by boards of directors of listed companies be supplemented by declarations of individual direct and indirect payments, profit-shares and stock options received by members of their management bodies.
Contacts
Bart Elias +32 (0)3 259 31 56
