A new 'Agoria Digital' index for price revisions in the digital sector
Inflation is affecting all sectors, and many technology companies are also feeling the impact of rising labour costs. Many technology contracts already contain price review clauses that allow agreed fees to be indexed annually. A lot of agreements refer to the (old) index published by Belgian technology federation Agoria. Recently, Agoria published a new Agoria Digital index that better tracks labour cost evolution and inflation in the digital sector.
The (new) Agoria Index
Under Belgian law, price review clauses generally need to meet certain conditions to be valid. For example, a price review clause cannot be linked to the consumer price index or any other general index, their application must be limited to 80% of the final price and the parameters used should represent real costs. In light of this, Agoria has for years published reference labour costs that could be used to calculate a price review.
But there were several reasons to modernise the existing Agoria index.
Because of high and rising inflation, technology companies were faced with a 3.58% labour cost increase in January 2022, while based on the Agoria index, end prices could only be indexed based on a 0.79% reference. This is because the Agoria index is calculated on the basis of index adjustments in the joint committee for metal, machine and electrical construction (PC 111), which take place annually in July. Most technology companies are subject to the additional national joint committee for white-collar workers (PC 200), where annual index adjustments take place in January. Whereas this discrepancy caused few difficulties in times of low inflation, it goes without saying that the discrepancy has an undeniable impact in the current economic climate.
Agoria wanted to simplify the calculation method and make it more transparent. It also planned to reduce the number of Agoria indices (160 in total), which included a breakdown according to geographical region, date and size of the company.
As the new Agoria Digital index, as required by law, better reflects the actual labour cost evolution of technology companies, Agoria also sees this as an opportunity to update existing technology contracts.
Agoria has recently decided to phase out its old Agoria index and replace it with a new Agoria Digital index, which is more relevant to technology companies (based on labour cost increases in PC 200). For completeness, we note that a new Agoria Manufacturing index (based on labour cost increases in PC 111) has been introduced, and that the old Agoria index was last published in July 2022. But Agoria will continue to publish a coefficient for the time being so the old index can still be calculated for ongoing contracts.
Application to new and existing technology contracts
It’s strongly recommended for technology companies to update any references to the Agoria index in new contracts containing price review clause and replace them with references to the new Agoria Digital index. They should also promptly implement such updates in any standard contracts used in the company.
For existing contracts that still refer to the old Agoria index, it seems appropriate to reach out to customers to update the existing contracts so the new Agoria Digital index can also be applied to them.
When formulating the price review clause (and more specifically, determining the timing of the indexation), it’s important to consider that the new Agoria Digital index is based on the cost evolutions in PC 200, where the annual labour cost indexation takes place in January (as opposed to the old situation based on PC 111, where the annual labour cost indexation takes place in July). More detailed information can be found on the Agoria website in its FAQ.
For any questions on the evolution or price review clauses in general, please reach out to your usual DLA Piper contact.