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SAVINGS AND INVESTMENTS

A bonus in the form of warrants

How exactly does it work?

As an employer,  you have the option of paying your staff a bonus in the form of warrants.. They are exempt from social security contributions, which is financially advantageous.

A warrant has the same economic characteristics as an option. This is a derivative financial product. It gives the holder the right - not the obligation - to buy or sell a certain amount of specific assets at a predetermined price (the strike price) on the maturity date of the contract.

Your employees can :

  1. Sell their warrants after the first stock exchange listing - this keeps the market risk limited to one night;
  2. Sell their warrants later, but before maturity;
  3. Convert their warrants into units of the underlying SICAV at the strike price.

Why choose warrants?

Warrants allow you to reward good workers in a financially advantageous way.

Financially attractive

  • For your company, warrants offer a double advantage: they are tax deductible and eliminate social security contributions for both the employee and the employer.
  • For your employees: there is no additional tax if the warrants are sold with an added value.

Efficient

Your employees may receive a higher benefit compared to a cash bonus. And you reduce your costs thanks to the exemption from employer social security contributions.

Low risk

The final parameters of the warrants are determined the evening before you give them to your employees, after the market closes. As soon as it reopens, they can sell their warrants. This limits the market risk to one night.

Flexible

You decide what amount you want to allocate to each individual employee. Your employees then choose when to exercise their rights.

Easy

There are several implementation methods, including a tool that allows your employees to manage the entire process via a digital platform.

 

 

Risks

Legal/social risk

You may be fined a social security penalty if you do not comply with the conditions.

Counterparty risk
• The holder of the warrants runs a counterparty risk towards BNP Paribas.
• You run a counterparty risk towards BNP Paribas between the purchase of the warrants and their allocation to your employees.
• Your employees run a counterparty risk towards BNP Paribas between the receipt and sale of the warrants.
• If the process takes place via a third party, the holder of the warrants also runs a counterparty risk with regard to that third party.

Market risk
• Your employees run a market risk for at least one night. The longer they hold their warrants, the higher the risk.
• The price fluctuations of the underlying fund also cause the price of the warrants to fluctuate.

Technical/operational risk

• Your employees are not obliged to hold a custody account with BNP Paribas Fortis. The warrants can therefore be transferred to a custody account with another bank. BNP Paribas Fortis has no control over this. As a result, there is a risk that the warrants will not be delivered on time.

Good to know

A bonus in the form of warrants falls under the Belgian Stock Options Act of 1999. It states that such a bonus is exempt from social security contributions under certain conditions. Before you can implement the bonus system, your company must undergo a legal, social and tax analysis.

Contact your relationship manager for more information. Not yet a customer?Contact us
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