Draft provisions under the Salary Moderation Act for 2023-24 finally published

In Belgium, collective bargaining agreements are traditionally negotiated for a two-year cycle, so 2021-22, then 2023-24 and so on.

Under the Salary Moderation Act (the Act of 26 July 1996 enhancing employment and the preventive safeguarding of the competitive position), every two years, a maximum margin for increasing remuneration is determined. The basic idea of the Salary Moderation Act is to ensure Belgium remains a competitive country. Workers’ remuneration costs in Belgium should not increase faster than remuneration costs in Germany, France and the Netherlands.

For the 2023-24 negotiation cycle, it quickly became clear the negotiations would be difficult. Contrary to Germany, France and the Netherlands, most workers in Belgium are covered by a system of automatic indexation of remuneration, which makes a huge difference if inflation stands at double digit numbers.

The Central Council for the Economy concluded that to keep remuneration costs in Belgium comparable with those in the neighbouring countries, for 2023-24 there was no room to increase remuneration given the increases resulting from the automatic indexation of remuneration.

In the hope of creating room to reach a compromise, on 28 March 2023 the Belgian government submitted a draft act to Parliament introducing the purchasing power premium. The idea is similar to the COVID-19 premium introduced back in 2020. The principle is that during 2023-24 no increases of remuneration are possible under the Salary Moderation Act (although the Salary Moderation Act stipulates a number of exceptions). But there is the possibility of granting a purchasing power premium of a maximum of EUR750. Similar to ecovouchers and meal vouchers, only licensed companies can issue purchasing power premiums. The premium is in principle only issued in electronic form.

Contrary to ecovouchers, there are no restrictions on the goods that can be purchased with the purchasing power premium.

From a tax point of view, the purchasing power premium is exempt from all income taxes up to a maximum of EUR750 for the worker. But a purchasing power premium granted to a self-employed person would be taxable. The premium is 100% deductible from a corporate point of view.

From a social security point of view, the purchasing power premium is exempt from normal social security contributions. The employer granting a purchasing power premium has to pay a social security contribution of 16.5% of the premium.

The draft Act submitted to Parliament does not specify who is entitled to a purchasing power premium. The idea is that collective bargaining agreements at the level of the joint committee would cover this. If the joint committee doesn’t reach an agreement, the draft act doesn’t state that the premium can’t be introduced with an individual agreement between the worker and the employer.