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.

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.

• View an example