Board member remuneration - whether and how to introduce it?
Multiple forms of granting remuneration
Performing the function of a management board member without remuneration may in certain situations lead to negative tax consequences. In practice, therefore, we are most often faced with a situation in which performing functions in the management board of a limited liability company involves a fee. A member of the management board of a limited liability company may receive remuneration both on the basis of a resolution adopted by the company's shareholders' meeting and on the basis of an employment contract or a civil law agreement concluded with the company, including the so-called managerial contract. The rules for the remuneration of management board members may also result from the wording of the company's articles of association.
If a member of the management board performs his function solely on the basis of appointment and has not entered into any separate employment or civil law contract with the company, remuneration may be awarded to him by a resolution of the shareholders' meeting, which should specify the amount of remuneration, the rules for its payment (including the dates on which the remuneration is to be paid) and any additional benefits for serving on the management board.
The remuneration granted to a member of the management board by a shareholders' resolution may be either permanent or paid only occasionally, e.g. as a result of the company's earning a certain amount of revenue. A shareholders' resolution may also be the basis for granting a management board member certain additional benefits, such as remuneration for a non-competitive activities or providing a car or a company phone.
Serving on the management board on the basis of a resolution of appointment is not a title to mandatory social insurance, while from 2022 it is a title to health insurance. The health insurance contribution rate is 9%.
Contract with a board member
A board member's remuneration may also result from an employment contract or other type of agreement concluded with him. The choice of the type of contract, the determination of the obligations to be imposed on the board member and the possible contractual extension of his liability depend on the will of the parties and should be adapted to the specific case. The remuneration of a board member established in this way for his benefit may be paid as a monthly salary or in some other manner agreed upon by the parties. It is also often practiced to make the payment of all or part of a board member's remuneration dependent on the company's financial performance.
Formally, there is no contraindication for a person serving as a management board member to enter into an employment or other contract with the company and at the same time receive additional remuneration based on a resolution of the shareholders' meeting.
Importantly, in contrast to the payment of remuneration solely on the basis of a resolution of the shareholders' meeting, if the function of a member of the board of directors is performed on the basis of an employment contract or a contract of mandate, the obligation to pay social security contributions will arise both in terms of social and health insurance. The board member will then be treated for insurance purposes as if he were an employee under either of the aforementioned contracts.