The object of the Work-related Expenses Scheme is to simplify the granting of compensations and distributions to employees. Although you were able for many years to opt for the Work-related Expenses Scheme or for the old system of free compensations and provisions, the WES will be mandatory as of 2015.

The general assumption of the WES is that all compensations and provisions that are made to employees and former employees constitute taxable income. You do not pay income tax and national insurance contributions on the amount in compensations and provisions that fall within the discretionary margin. No final levy of 80% is owed up to this amount.

Certain items may not be placed in the discretionary margin, but must be provided as salary, such as the company car and fines. 

The WES was adjusted on 1 January 2015, however:

  • The percentage of the discretionary margin (fixed) decreased from 1.5% to 1.2% of the total taxable income.
  • Tools, computers and mobile means of communication are exempted if they are needed within reason according to the employer’s reasonable opinion for the employment (the necessity criterion must also be satisfied).
  • Discounts on products from your own company are exempted subject to conditions (up to 20% of the market value and €500 per year).
  • The distinction between compensation and provision has lapsed for several workplace facilities.
  • The final levy on the amount exceeding the discretionary margin may be determined at group level. A group exists in case of an interest of at least 95%.
  • The withholder who exceeds the discretionary margin does not have to pay until the first payroll tax return in the new calendar year.


The following steps must be followed for correct application of the WES:

  1. Determine whether the compensations and provision to employees and former employees must be designated as salary.
  2. Determine which compensations and provisions are designated as final levy component. Compensations and provisions that have not been designated must be incorporated in the pay slips as taxable salary.
  3. Apply special rules to the designated items:
    a. targeting exemptions (do not affect the discretionary margin of 1.2%),
    b. zero valuations (do not affect the discretionary margin of 1.2%),
    c. fixed valuations (do not affect the discretionary margin of 1.2%),
  4. Determine the amount in designated compensation and provisions determined with due observance of these special rules, remains within the 1.2% discretionary margin of the wage bill for tax purposes.You may have to adjust the terms of employment. The basic assumption is that this is only allowed if the employee agrees thereto. A collective, unilateral change to the terms of employment to the detriment of the employee is only allowed if you have agreed this in writing and you are able to demonstrate that you have a compelling business interest in the change. You will also have to look at matters such as a phasing-out scheme and whether you are able to generate support within the Works Council (if it has been introduced).

Please note! If you do not adjust the administration of the Work-related Expenses Scheme, you run the risk of incorrect payroll tax returns and any additional assessments and fines.


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