16 September 2024

BeNe Employment Newsflash #1

BELGIUM

Unless otherwise stipulated, in principle a bonus is payable pro rata upon leaving employment during the reference period.

However, it's generally accepted that policies can deviate from this principle, by adding an award condition that requires the employee to still be in service. Most courts accept this condition if it's expressly included in the written bonus terms before the start of the reference period.

These written bonus terms are drafted in the appropriate language (Dutch or French, depending on the applicable language legislation). The end of the employment contract, which prevents the employee from claiming their (pro-rata) bonus, shouldn't constitute a fault on the part of the employer. Indeed, if a condition isn't fulfilled due to a fault of the contracting party, the condition will still be considered fulfilled.

A "normal" dismissal isn't considered a fault on the part of the employer. However, when the employment contract ends, for example, due to a serious fault on the part of the employer, the employee will be entitled to their bonus regardless of the condition that requires the employee to still be in service.

As is the case in the Netherlands, it's important to clearly define bonus eligibility criteria in writing, and particularly determine that the employees are only eligible to a bonus if they're employed at the end of the reference period or at the payment date. In the Netherlands it's also recommended to include a clause that a bonus in one year does not guarantee future bonuses and that payouts are subject to the employer's discretion.

 

NETHERLANDS

Whether an employee is entitled to receive a bonus upon leaving a company is often a point of discussion. This entitlement depends on the conditions outlined in the employee's employment agreement or applicable bonus scheme. The condition may include personal targets and remaining employed until a specific date. Additionally, employers want to have as much freedom as possible and stipulate that payment of the bonus is the discretionary authority of the employer. This usually leads to discussions at the end of employment and Dutch case law confirms that this discretion cannot be exercised unreasonably. The employer must still act as a "good employer," as required by Dutch law.

If an employee exits, they might claim a pro rata bonus, arguing they (partly) met their targets. However, if the bonus scheme explicitly requires continued employment for the entire year or until a specific date, the employer can argue that no bonus, including a pro rata amount, is due if the employee doesn't meet these criteria.

In cases where bonus entitlements aren't clearly defined in writing but have been consistently paid, employees might argue that the bonus has become an "acquired right." This could make it difficult for the employer to withhold the bonus, as it may be considered part of the employee's employment benefits. Such benefits generally cannot be unilaterally amended, and the employee's consent is required. The employee may still be entitled to the bonus in subsequent years.

To avoid disputes, employers should clearly define bonus eligibility criteria in writing, ensuring all parties understand expectations, even at the end of the employment. Including a clause that a bonus in one year does not guarantee future bonuses, and that payouts are subject to employer's discretion is also advisable, as it may give the employer flexibility in the bonus distribution.

 

BELGIUM

Unlike in the Netherlands, the concept of sales representatives is very well known in Belgium and is often the subject of discussion (and even procedures before the labour courts).

An employee will qualify in Belgium as a sales representative if the main activities are:

  • Prospecting and (physically) visiting clients outside the premises of the company. A sales rep mainly executes their sales activities outside the company premises.
  • Negotiating and concluding deals. An employee cannot be qualified as a sales representative if they only meet clients with a view to promoting a good or a service without actually negotiating the deal.

Sales representatives shouldn't be confused with sales agents, who, like in the Netherlands, are self-employed.

The consequences of being qualified as a sales representative are threefold:

  • Commission pay: legal entitlement to commissions on orders they place and which are accepted by the employer. This can also include orders placed and accepted after they left the employer. So, one needs to be careful when using the term "commission" in a bonus plan. It's also important to stipulate in a bonus plan (for sales reps) when an order is accepted.
  • Clientele indemnity: The clientele indemnity is a legally defined lump-sum compensation for loss of clientele due upon termination of the employment contract, to which sales representatives can be entitled as soon as they reach at least one year seniority in their role as a sales representative.

The amount of this indemnity corresponds to three months' salary, and increases in function of the seniority (as of five years of seniority).

  • Working time provisions: sales representatives are not entitled to overtime pay.
  • Other specifics: the territorial scope of the non-compete should not be limited to Belgium and no indemnity is due to enforce the non-compete. There are also specific rules regarding sickness pay and public holiday pay.

It's very important to take the sales representative principles into account when drafting employment contracts, bonus plan and / or function description, as qualifying an employee as a sales representative can have far-reaching consequences.

 

NETHERLANDS

A sales representative (handelsvertegenwoordiger) is an employee who, under an employment agreement, mediates agreements between their employer and external parties. While a sales representative may have the authority to negotiate and finalize agreements on behalf of their employer, they operate under the employer's authority and must adhere to their instructions.

This role differs from that of a sales agent (handelsagent), who operates independently and isn't under the direct authority of an employer. Unlike sales representatives, sales agents work under a services agreement, giving them more freedom in how they carry out their work. But they also bear more risk and less protection under Dutch labour law.

Sales representatives, like other employees, work under an employment agreement. The key difference with "normal" employees is that Dutch law specifically stipulates that their salary consists partly or entirely of commission. This commission-based structure means that their monthly compensation is variable, depending on the value or number of contracts they secure through their mediation. Despite this variability in earnings, Dutch law still provides the sales representatives with the same employment law protection to ensure the same fundamental rights and security as other employees. This includes:

  • entitlement to at least the Dutch minimum wage;
  • the same dismissal protection;
  • entitlement to statutory benefits such as continued payment during illness;
  • 8% holiday allowance;
  • and pension benefits.

Commission-based remuneration has become more common in recent decades. But maybe due to the old nature of the sales representative employment agreement, the number of employees working under  this type agreement in the Netherlands is relatively small, likely numbering only a few thousand.

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