What specific rules applying to remuneration policy in the Netherlands are relevant to financial enterprises applying for a licence in the Netherlands?
The rules applying to remuneration in the Netherlands are the European rules that apply in all EU Member States. The Netherlands has opted for a wider scope of the remuneration rules and a lower bonus ceiling than that stated in the European regulation for banks, investment firms, insurers and managers of collective investment schemes. The Dutch Remuneration Policy (Financial Enterprises) Act (Wet Beloningsbeleid Financiële Ondernemingen, or ‘Wbfo’) sets additional requirements for variable remuneration. These rules include the bonus ceiling, rules relating to retention payments, welcome and severance packages and publication obligations.
Bonus ceiling: bonuses for employees at Dutch financial enterprises may not exceed 20% of the fixed salary. The bonus ceiling in the European remuneration rules for banks and investment firms is 100% and only applies to what are known as ‘identified staff’.
Ban on guaranteed bonuses: a relatively high variable payment is undesirable if this is not in return for any or only limited performance within the business. There is therefore a prohibition applying to these guaranteed bonuses.
Strict conditions for severance packages: The severance payment for a director (a person in charge of day-to-day policy) may not exceed one year’s salary. Employers may not pay severance payments:
- if a person leaves voluntarily
- if a person has not performed their duties adequately (such as seriously culpable failure)
- to a director (a person in charge of day-to-day policy) when a company fails
Bonus clawback: The supervisory board of a financial enterprise may adjust or reclaim a bonus paid to a director. For instance, if the economic position of the company is weak or if the company has not achieved the objective for which the bonus was offered. The power to adjust or reclaim bonuses applies to all employees. In addition, adjustment or reclaim is mandatory if employees contravene professional standards or are responsible for large losses.
Possibilities for deviating from 20% bonus ceiling
- Non-collective employment agreement exception: exception for employees not included in a collective employment agreement (CAO). These employees are subject to an average bonus ceiling of 20%, subject to none of the employees being able to receive a payment that exceeds 100% of their fixed annual salary.
- Employment in another EEA Member State: the 100% bonus ceiling applies to persons who perform most of their duties in another Member State.
- Employment outside the EEA: persons employed outside the EEA are also subject to the 100% bonus ceiling, but subject to approval by the shareholders may be awarded a variable remuneration of 200%.
- International holding company: employees of a Dutch holding company that heads an international group are, subject to conditions, subject to a bonus ceiling of 100%.
- Branch of bank or investment firm: the bonus ceiling of 20% does not apply to branches of banks and investment firms with registered offices in the EEA.
- Exempt institutions: managers of collective investment schemes, managers of undertakings for collective investment in transferable securities (UCITS) and traders who trade exclusively for their own account are exempt from the bonus ceiling. Traders who trade exclusively for their own account are obliged to qualify as a ‘local company’.
- Employee retention: lastly, an employee may be awarded a higher variable remuneration if the person in question is needed for a permanent change to the organisation and thus can be retained within the organisation (retention payment). This is subject to prior approval from the supervisor.
For questions regarding the remuneration rules applying in the Netherlands, send an email to brexit_Application@afm.nl.
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