Employee stock options: the risk of the 7.5% contribution

Thinking about using stock options to motivate and retain your team? From the 2026 income year, a separate 7.5% contribution applies where lump-sum benefits in kind granted to your employees exceed 20% of their total taxable remuneration. Here’s how that risk is triggered — and how to get ahead of it.

The penalty that applies to benefits granted to employees

Where benefits in kind valued on a lump-sum basis granted to employees exceed the 20% threshold of their total taxable remuneration, the excess portion becomes subject to a separate 7.5% contribution. This adds to the existing tax burden and represents a direct extra cost for the employer.

One thing worth flagging: this contribution isn’t tax-deductible for the employer’s income tax. It has to be added back as a disallowed expense, which pushes its real economic impact beyond the headline 7.5% rate.

Why this penalty hits harder than it does for directors

Unlike the penalty that applies to company directors — capped at EUR 5,000 per financial year through the loss of the reduced corporate tax rate — the 7.5% contribution on employee benefits has no cap in absolute terms. It applies proportionally to the entire portion of the benefit above the threshold. In other words, the further you go over, the bigger the hit.

For a company that relies heavily on option plans as part of a flexible pay strategy, this measure can upend financial arrangements built up over years and force a rethink of remuneration policy.

How a concentrated grant can tip the whole company over

The 20% threshold isn’t assessed employee by employee — it’s assessed collectively across the whole workforce, based on the remuneration reported on 281.10 forms. That collective approach has a direct, often underestimated consequence: granting a significant volume of stock options to a small number of people can be enough to push the entire employee category over the threshold.

Put differently, an option plan concentrated on a handful of key profiles — a lead engineer, a head of sales — can be enough to trigger the 7.5% contribution.

How to keep your variable pay policy on the right side of the line

The 20% threshold is now a genuine tax risk indicator to monitor closely — not just a box to tick when granting options. Companies will need to check, year after year, that the total lump-sum benefits granted to employees stay within the limits set by lawmakers.

In practice, that means building this check into your remuneration policy and assessing the impact of every new option grant against the 20% threshold before signing off on it, not after. Regular monitoring keeps you in control of the balance between ordinary pay and lump-sum benefits in your teams’ overall package.

If you’re a director and an option holder yourself, the personal tax impact is different — we cover that in our article Directors’ stock options: what’s the tax impact in 2026?.

FAQ

What exactly is the separate 7.5% contribution?

It’s a contribution that applies to the portion of lump-sum benefits in kind granted to employees that exceeds 20% of their total taxable remuneration. It comes on top of existing taxation and represents a direct cost for the employer.

Is this contribution deductible for the employer?

No. The 7.5% contribution isn’t tax-deductible against the employer’s income tax, whether that’s corporate tax, tax on legal entities (e.g. non-profit associations) or personal income tax. It has to be added back as a disallowed expense, which increases its real economic impact.

Is the 20% threshold assessed per employee?

No. It’s assessed collectively across the whole workforce, based on the remuneration reported on 281.10 forms — not employee by employee.

Can a concentrated option grant to a few employees be enough to breach the threshold?

Yes. Because the assessment is collective, a limited number of substantial stock option grants to a handful of employees can be enough to push the entire employee category over the 20% cap.

How do you avoid breaching the 20% threshold on your option plans?

By building a regular check of the ratio between lump-sum benefits and total remuneration into your HR policy, and by assessing the impact of every new option grant against the threshold before approving it, rather than afterwards.