New bill regarding the safeguarding of competitiveness

Labour law reforms in Belgium: flexible and workable work, re-integrating long-term sick employees and safeguarding competitiveness

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The Act of 19 March 2017 modifying the Act of 26 July 1996 (Act on the Salary Standard) creates a new framework for the social partners to determine the salary standard. This salary standard establishes the maximum margin by which the average labour cost per employee can be increased to safeguard the competitiveness with neighboring countries (Germany, France and the Netherlands).

Contents

Previous legal framework

The previous legal framework contained the following principles concerning the salary standard:

  • The salary standard is calculated by the social partners on a two yearly basis
  • Salaries are subject to an automatic indexation and scaled increase
  • The salary standard is calculated bearing in mind the expected evolution of the labour cost in the neighboring countries

Based on these principles, the salary standard was set at 0% for 2015, meaning that salaries could not be increased (except for the automatic indexing and scaled increase). For 2016, the salary standard was set at 0,5% of the gross labour cost, in addition to a salary standard of 0,3% net without any additional cost for the employer.

Employers could face administrative sanctions for exceeding the salary standard, however, these sanctions could not be enforced.

New Act on the Salary Standard

To determine the new salary standard for the upcoming years, the social partners will have to bear in mind new principles laid down in the Act on the Salary Standard. These principles are more or less the same as the previous, with the understanding that:

  • Apart from the expected future evolution of the labour cost in the neighboring countries, the social partners also have to take the past evolution of the labour cost in Belgium since 1996 into account
  • The new act introduces a safety margin, to compensate eventual errors in the expected evolutions. This safety margin is equal to a quarter of the margin and at least 0,5%. However, this safety margin will, for the time being, not be applicable as this was not included in the initial interprofessional agreement
  • Cost reductions, e.g. resulting from the tax shift, will not be taken into account for the wage handicap

The agreement of the social partners has to be concluded in a collective bargaining agreement of the National Labour Council and declared generally binding by Royal Decree. If such a CBA is not concluded, the Government will determine the salary standard by Royal Decree.

The Act on the Salary Standard also provides new administrative sanctions between € 250 and € 5000 per employee, with a maximum of 100 employees. Hence, an employer who exceeds the new salary standard, faces a maximum sanction of € 500.000. Legal surcharges are not applicable to these amounts.

Salary standard for 2017 and 2018

On 21 March 2017, the social partners concluded a collective bargaining agreement within the National Labour Counicl, determining the salary standard for 2017 and 2018. The maximum margin for the labour cost evolution during these years is set at 1,1%.

It is now up to the sectors on how they want to fill in the margin of 1,1%. Different options are possible. E.g., sectors are free raise the gross remuneration, add a new or increase an existing wage benefit, grant an additional holiday, etc.

If the sector does not entirely use the 1,1% margin, companies can fill in the remaining part of the margin.

Actions

(i) It is recommended to be attentive for sectoral agreements about how the 1,1% salary standard will be applied
(ii) Eventually, if the sector has not entirely used the maximum 1,1%, companies can agree if and how the remaining part of the salary standard will be filled in
(iii) In any case, it is strongly recommended to make sure the 1,1% margin is not exceeded as there are now severe penalties possible when the margin is not respected