Emerging trend of warrants as variable pay is on the increase in Belgium
In the dynamic realm of Belgian compensation, the emergence of warrants as a variable pay delivery method has taken center stage. A recent survey conducted by WTW sheds light on this transformative trend, revealing insights from various local organizations across diverse industries. Notably, this shift gains even more significance against the backdrop of an anticipated tax reform in Belgium for 2023, which failed to materialize due to a lack of government consensus.
Warrants, in essence, represent the right to buy or subscribe to any company's shares at a predetermined price within a specified timeframe. What makes warrants increasingly attractive is their unique tax advantage. In a landscape where employees seek a more substantial take-home pay, warrants provide an avenue to achieve just that. Unlike cash payouts, which are subject to significant taxation, warrants are exempt from social security contributions. This exemption results in a more favorable net payout for employees, making warrants a financially savvy choice. Also from an employer's perspective, the exemption from social security contributions, contingent to certain criteria, enhances the financial viability of opting for warrants.
A resounding 83% of organizations confirmed offering warrants as a pay-out alternative to cash performance bonuses or sales incentives. This overwhelming majority underscores a widespread recognition of warrants as a preferred variable pay delivery method. The inclusivity of warrants across employee categories, from executives to technical and business support staff, paints a nuanced picture of how organizations are reshaping their compensation strategies to engage a diverse workforce.
For those fewer organizations not currently offering warrants, 80% provide alternative pay-out options for cash bonuses or sales incentives. However, the survey suggests a potential shift in the future landscape, with 40% expressing interest in incorporating warrants—a testament to the adaptability and foresight of organizations in responding to evolving employee preferences. From the CAO90 bonus, certain pension schemes or different stock options, organizations are increasingly trying to find ways to accommodate for a higher net payout of variable pay for their employees. Although the warrants still being the most popular choice.
40% If not offering warrants yet, 40% is looking to offer this in the future.
Beyond being a tax-efficient option for employees, warrants also offer strategic benefits for organizations. The survey reveals that a staggering 88% of organizations who offer warrants, share the savings from the employer social security contributions with employees by offering higher ratios of warrants compared to cash bonuses. This alignment of financial goals serves as a testament to the fact that organizations not only optimize their cost structures, but also contribute to the financial well-being of their workforce, which in turn drives the employee satisfaction and the external view of an attractive employer.
As Belgium navigates the intricate waters of compensation strategies, warrants have (re-)emerged as a beacon of stability and financial prudence. The failure of the anticipated tax reform for 2023 has inadvertently played into the hands of the warrant system, solidifying its position as a reliable variable pay delivery option. The allure of tax efficiency, coupled with the inclusive distribution across employee categories, paints a compelling picture of why warrants have become the preferred choice for forward-thinking organizations and their diverse workforce. In a landscape where adaptability is key, the warrant system is offering a win-win solution for both employers and employees alike.