Payroll costs
The Risk Premium
1. Definition
The risk premium is a salary supplement granted to employees due to their exposure to the risks inherent in their work.
It does not reward performance; rather, it compensates for exposure to risk. This is what distinguishes it from a performance bonus, which is based on an employee’s output.
2. Legal Basis
It is established by Decree No. 99-0892/MF-SG, which sets forth the rules for deducting bonuses and allowances paid in addition to salary from the taxable base.
The founding text is therefore a tax law: it establishes how the bonus is treated with respect to the taxable income base.
3. Who is eligible, and at what rate
It is granted to all employees, at 10% of their base salary.
Two characteristics, to be considered together.
3.1 A General Bonus
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Why a general scope? Exposure to risk is not specific to any one category: it stems from the company’s activities and the very fact of working there. A bonus reserved for only a few would require sorting employees according to their degree of exposure—an exercise not provided for in the text.
Opting for a general bonus avoids this categorization and, in the process, satisfies the criterion of universality that all salary supplements must meet.
3.2 A Proportional Rate
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The amount is not a flat rate: it is based on each employee’s salary.
| Monthly base salary | Risk allowance (10%) |
|---|---|
| 100,000 CFA francs | 10,000 CFA francs |
| 250,000 CFA francs | 25,000 CFA francs |
| 400,000 CFA francs | 40,000 CFA francs |
The impact of choosing a percentage. A flat-rate bonus would represent a very different share of income depending on salary levels—substantial for those with the lowest salaries, and marginal for those with the highest.
The percentage maintains balance: the bonus carries the same relative weight in each person’s compensation.
4. The Big Picture
Three characteristics give this bonus its coherence:
| The characteristic | What it contributes |
|---|---|
| A Founding Document | The bonus is not based on a discretionary decision by the employer |
| General applicability | It applies to all employees, without exception |
| A single calculation formula | 10% of base pay, for everyone |
Taken together, these three elements satisfy the criteria for classification as wages: generality or uniformity, a fixed rule, and consistent application. The hazard pay is therefore, by definition, a transparent and predictable benefit: everyone knows who is entitled to it, how much they receive, and according to what rule.
5. Scope of Application
The allowance is granted to employees of companies whose work involves a specific risk. A general hazard pay allowance in a consulting firm is not justified in the same way as it is at a mining site.
Key Points in 4 Items
- The hazard pay compensates for exposure; it does not reward performance.
- It is established by Decree No. 99-0892/MF-SG, regarding the procedures for deducting bonuses and allowances paid in addition to salary from the taxable base.
- It is granted to all employees, without distinction.
- The amount is 10% of the base salary; it is proportional, not a flat rate.