'All in' remuneration packages are not allowed

Contractual documents between employees and employers sometimes contain “all in” remuneration packages.

The Employment Appeal Tribunal decided, in its judgement of 9 October 2018 (published this year), that “all in” remuneration packages are not allowed under Belgian law.

The facts were the following.

A cycling team and a professional cyclist agreed in an employment contract on a total remuneration of EUR150,000 per year. The parties also agreed that there would be a complementary pension scheme. According to the employer, the contributions for this pension scheme were part of the agreed amount of EUR150,000. When the pension scheme was introduced, the employer therefore reduced the remuneration so the sum of the remuneration and the contributions in the pension scheme equalled EUR150,000 per year. The employee challenged this when the employment relationship had ended.

The Employment Appeal Tribunal considered that the employment contract did not specify that the remuneration would be reduced when the complementary pension scheme would be introduced. The employment contract did thus not justify the reduction of the remuneration imposed by the employer.

The 1965 Act on the Protection of the Employees Remuneration stipulates that the employee should be free to decide how they spend the remuneration. This Act therefore prohibits agreements whereby the parties would first agree on an annual remuneration, and would then agree that the remuneration will partially be paid in a complementary pension scheme, to which the employee has in principle only access when reaching retirement age (although here, the exception applied whereby professional sportspeople can access their retirement capital at the age of 35 if they no longer compete professionally).

The Employment Appeal Tribunal also referred to the judgements rendered by the Supreme Court on 1 June 1987 and 25 October 1999, in which it was held that “all in” agreements whereby respectively holiday pay and the remuneration for bank holidays would be deemed to be included in one global amount, are invalid.

Also, the pension regulations could in this case not justify the employee contributions, as the employee did not sign a copy of those pension regulations for approval.

As there was no agreement for a deduction of the remuneration, the employer was ordered to pay damages to the employee. The Employment Appeal Tribunal considered that retroactively setting up a pension scheme, but now with employer contributions, rather than employee contributions, was not possible. Cancelling the pension capital build up with employee contributions would have tax consequences, hence the best way to remedy the situation was granting compensation equalling the difference between the actual net remuneration (i.e. after deduction of the employee contribution to the pension scheme), and the hypothetical net remuneration if those deductions had not been made.