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The innovation bonus
or how to reward creative
employees
10 questions and answers about
innovation bonuses
PRACTICAL GUIDELINES FOR COMPANIES
This brochure aims to answer some of the practical questions companies ask about introducing a
system for awarding innovation bonuses. The
legislation provides a basis for the system but
several points require further clarification, such as
the conditions that need to be met, the type of
innovation that can be rewarded and the procedures for notifying the relevant authorities. The
Federation of Enterprises in Belgium (FEB) raised
these questions with the relevant public authorities in a bid to simplify the situation.
This brochure is a practical guide for companies
and is aimed at staff in charge of introducing innovation bonus systems.
DID YOU KNOW?
• Just under 50% of companies have an internal policy for encouraging innovation.
• Most companies do not have a long-term approach to or formal
procedures for collecting innovative ideas.
• Proposals for innovation are usually assessed by general management.
• Only 20% of companies reward employees who come up with
innovative proposals.
• Companies in the R&D sector are the most likely to reward
creative employees and usually do so with a one-off payment.
• This type of one-off payment is fully in keeping with the philosophy
of the innovation bonus.
Source: FEB survey of 200 companies (autumn 2005)
1. WHAT IS AN INNOVATION BONUS?
In a bid to encourage creativity in companies, FEB tabled the concept
of an innovation bonus during negotiations on the 2005-2006 crossindustry agreement for the private sector. This gives you a chance to
reward employees who come up with ideas resulting in a genuine
innovation in the company in 2006. Normally, this kind of bonus
would cost you up to three times the net amount received by the
employee. But this year, as an experiment, innovation bonuses are
exempt from social security contributions (by both employers and
employees) and income tax. In other words, the cost of the bonus is
simply the amount received by the employee. This preferential arrangement is, of course, subject to certain conditions and criteria. 1
2. NO BONUS WITHOUT INNOVATION. WHAT TYPES OF
INNOVATIVE IDEAS CAN BE REWARDED WITH A BONUS
AND WHAT CONDITIONS MUST BE FULFILLED?
No exact definition for innovation was drawn up. This was a conscious
decision because the concept can be understood in many different
ways: it covers not only new products and services but also improvements to manufacturing processes and the working environment, for
example. This broad definition also takes into account the fact that all
employees, whatever their role, level of training or position in the company can be considered for an innovation bonus, not only those actively involved in R&D.
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Three basic conditions must be met:
• the innovation must bring real added value to the company's normal business activities;
• the innovation must be spontaneous: it must not be the result of
a request by a third party outside the company (for example,
request for a quote from a client);
• the innovation must actually be implemented in the company,
or it must involve a prototype or a request to manufacture a prototype. 3
3. WHICH TYPES OF COMPANY CAN
AWARD INNOVATION BONUSES?
All companies in the private sector, i.e. all companies subject to the Law of 5
December 1968 on collective labour agreements and joint commissions. 4
4. WHICH TYPES OF WORKERS CAN
RECEIVE AN INNOVATION BONUS?
All employees who have signed an employment
contract with the company/employer awarding the
bonus. This applies to all types of employment contract, for example, permanent, temporary, specific
tasks or student jobs. 5. WHAT OTHER CONDITIONS OR RESTRICTIONS APPLY?
The bonus may not under any circumstances replace any salary or benefit that
employer must pay out under the terms of the employment contract (fixed or variable
salary, benefits in kind, bonuses or other additional allowances subject to or exempt
from social security contributions). In other words, the bonus is paid in addition to the
employee(s)' usual salary. The bonus may not exceed an employee's gross monthly
salary and total bonuses paid in 2006 may not exceed 1% of the total payroll declared
to the national social security office (ONSS/RSZ) for that year. The '10-10 rule' also
applies: innovation bonuses can be awarded to a maximum of 10% of employees - with
the exception of companies with less than 30 employees where the limit is set at 3
employees - and to a maximum of 10 workers for the same creative idea. These conditions are cumulative and must be fulfilled at the same time.
Practical example: a company has 50 employees and a total payroll of €1.5 million.
Innovation bonuses can be awarded to a maximum of five employees (10% of the
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6. WHAT RULES APPLY AS REGARDS THE REFERENCE
PERIOD FOR INNOVATION AND PAYMENT
OF THE BONUS?
The innovation must be clearly linked to the 2006 (calendar) year. The added
value generated must, therefore, have an impact in 2006. All innovation involves several successive stages, from the proposal to the actual implementation.
Implementation may have started before 2006 but it must produce results in
2006. These conditions have been laid down by Federal Public Service Economy, which will assess and approve all innovation projects (see question 8). 7. WHAT PRACTICAL STEPS
NEED TO BE TAKEN ONCE A
COMPANY DECIDES TO
INTRODUCE A SYSTEM FOR
INNOVATION BONUSES?
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total number of staff employed by the company)
for a maximum total of
€ 15,000 (1% of the total
payroll). The bonus awarded to each employee
must not exceed his or
her gross monthly salary.
And finally, once the quota of five employees has
been reached, no more
innovation bonuses may
be awarded. 5
A key step is to inform your company about the
new innovation scheme.
Before this happens, however, you need to
take time to prepare the scheme. Once the
rules have been established, you should
explain the process to all members of staff in a
clear and transparent manner. You then need
to complete a form presenting the planned
innovation project to Federal Public Service
Economy. This form provides a brief description of the project due to be rewarded by an
innovation bonus, the added value it generates
and (progress made in) implementation of the
innovative idea in the company. The last section of the form contains a declaration of
honour guaranteeing compliance with the
three basic conditions (innovative idea was
developed internally, the bonus does not replace the employee's salary and the company
has met its obligations to promote the scheme
internally).
Finally, the employer must also notify the social
security authorities (ONSS/RSZ) of the names
of the beneficiaries and the sum(s) paid out
during the month following payment of the
innovation bonus. 8
8. HOW DOES FPS ECONOMY PROCESS
APPLICATIONS?
FPS Economy must be notified of innovation bonuses on a project
basis, i.e. a separate report must be submitted for each project. The
Competitiveness Department in FPS Economy is in charge of collecting information on innovation projects. It checks the form to establish whether all of the conditions for innovation have been fulfilled.
Within one month, the results of this analysis are sent out to you
(the applicant) and to the ONSS/RSZ. FPS Economy may request
further details in order to assess your innovation project. 9. WHAT ROLE DOES THE ONSS/RSZ PLAY?
The ONSS/RSZ is automatically notified
when FPS Economy approves a project.
However, you are still required to notify
the ONSS/RSZ of all bonuses awarded
within one month after they have been
paid out. You must provide information of
the amount(s) paid out and the name(s) of
the employee(s) concerned. The ONSS/
RSZ can then check whether the conditions of the bonus have been met (i.e. the
sum and number of recipients). This procedure occurs after the bonus is awarded,
i.e. after it has actually been paid out. In
principle, all these conditions must be
met, otherwise the entire bonus is subject
to social security contributions. However,
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10. WHEN DO THE BENEFITS OF THE INNOVATION
BONUS SCHEME TAKE EFFECT?
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As soon as you have told
your company about the
bonus system and been
given the go-ahead from
FPS Economy. >
if there are factors that justify the non-application of
certain criteria, the ONSS/RSZ will examine the possibility of maintaining the exemption in full or in part.
The employer may also apply other reward schemes
subject to social security contributions, in addition to
the scheme for innovation bonuses. The innovation bonus
or how to reward creative
employees
10 questions and answers about
innovation bonuses
FEB
Rue Ravenstein 4
B-1000 Brussels
T + 32 2 515 08 11
F + 32 2 515 09 99
[email protected]
www.feb.be
Legal registration
D/0140/2006/2
The full text of this
brochure is also available
online (in pdf format)
on the FEB website at
www.feb.be (publications/
brochures for free)
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Content officer
Olivier Joris
rue du Wolvenberg 17
B-1180 Brussels