Practice Area Articles
By Anke Istace and Kris De Schutter
Back to International Employment Law
KEY DEVELOPMENTS FOR 2021
Measures to limit the negative impact of the rules on international mobility
Companies that operate internationally and whose employees regularly work from multiple countries traditionally resort to the so-called salary split. This involves dividing the taxable salary between different countries depending on the effective physical presence in those countries, which is advantageous for both the employer's wage costs and the employee's net salary.
The global pandemic has limited travel and led to an increase in the number of workers working from home. Employees who used to carry out their activities in different countries are now only working from one country. The salary split could therefore not be applied.
Not only did the spread of COVID-19 have an impact in the tax field, it also affected the social security position of the employee. The EC Regulation 883/2004 states that an employee who lives in one country and works in another is socially insured in the country of employment. However, if the employee performs a substantial activity in the country of residence, they will be socially insured in the country of residence.
Since many workers were forced to work at home (in their country of residence) because of the measures imposed under COVID-19, their social security position would change.
For the time being, the Belgian Government has taken measures to limit the negative impact of the rules on international mobility. For example, the Government has decided that it will not take into account periods of work from home on Belgian territory when assessing the applicable social security. In addition, various agreements have also been concluded with other countries to also limit the tax impact.
Both in the area of tax and social security, however, the question arises as to the future sense and nonsense of rules geared to far-reaching international mobility. If international mobility is not restored to its original state in the future and if physical contacts are largely replaced by online meetings, then it is to be expected that the rules will also lose their usefulness and have to be adjusted. After all, there is no point in spreading the taxable salary over different countries if work is only carried out in one country, and it is also difficult to maintain that employees whose country of residence and country of employment de facto coincide because of work from home still have a de jure social security status that does not correspond to that reality.
Flexibilisation of labour
The spread of COVID-19 and the Government measures imposed in that context not only impacted international mobility, but national mobility to, from, and within workplaces was also restricted. As a result, many workers were forced to work from home. For those workers and companies for whom this was operationally impossible, the system of temporary unemployment, whereby their wages are replaced by an allowance, was introduced.
It is to be expected that the expanded opportunities to work from home will continue to be retained in many companies in the future. Employers are therefore well advised to develop well thought-out policies in which the conditions and modalities of working from home are clearly defined. Various elements must be taken into account in this regard: a balance must be sought between flexibility and security, investments must be made in digitalization, ways must be sought to preserve collegiality and involvement in the company, to control work, and to reimburse expenses in a way that is favourable from a tax and social security perspective, etc.
The legal framework for all this is, as yet, quite limited and not adapted to a situation whereby work from home is commonly applied. Thus, not only employers, but also legislators face quite a challenge.
Companies in difficulty are being forced to restructure their business
Unfortunately, the global COVID-19 pandemic is also causing some companies to run into difficulties and to be forced to restructure in order to cope with these difficulties.
Restructuring can be accompanied by savings in employment costs and can therefore lead to dismissals. Employers must always be mindful of complying with the legal rules related to collective dismissals. These rules apply as soon as a certain number of employees are dismissed during a 60-day period. This number depends on the size of the company.
If the thresholds are reached, well-defined legal procedures must be followed. An information and consultation procedure must be put in place, the sub-regional employment service must be informed and, in addition, the employer is obliged to pay special compensation to the workers. Failure to comply with these rules can have far-reaching consequences: the possible dismissals can be considered non-existent which means that the employment contracts must continue to be executed and, at least, the wages must be paid.
In the event of a collective dismissal, it should be taken into account that it is possible for older workers to receive a company bonus on top of unemployment benefits after dismissal. To qualify for this, strict age and career conditions must be met.
These conditions are set by the National Labour Council and have already undergone several changes making it increasingly difficult to be able to apply for a company bonus. A company in difficulty or undergoing restructuring can benefit from a special scheme for which the age condition was raised: currently, a minimum age of 60 years applies. This is an increase of two years compared to January 1, 2019.
In order to achieve a humane solution that strives both for the survival of businesses and the economy in general and to ensure the individual well-being of all employees, employers must strictly follow the legal procedures. In addition, the workers and their profiles should be carefully mapped so that, if possible, a company bonus can be granted.
KEY DEVELOPMENTS FOR 2020
Changes to flexible benefits
The Belgian authorities have taken steps to curtail an employer's ability to offer employees certain flexible benefits. One example of this is the annulment of the 'cash4car' system by the Belgian Constitutional Court, which enabled employees to exchange their company car for a global mobility budget. This system will no longer be available from the end of 2020.
The Belgian tax and social security authorities have also limited the creativity of employers who may have implemented flexible-reward plans, by making changes to the tax treatment of certain employment benefits (e.g., mandatory payment of social security contributions on enhanced child allowances).
Concept of remuneration
The decision by the Belgian Supreme Court in the Sisley case has clarified the treatment of variable pay granted to employees by third parties. This decision confirms that if variable pay and benefits are granted to employees by a third party for services provided within the framework of the performance of their employment contracts, the third company is liable to pay social security contributions in respect of such remuneration, even in the absence of an employment contract between the employees and the third company.
Limits on the right to strike
The Belgian Supreme Court has ruled on a clear limitation of the right to strike. The Supreme Court confirmed that although the right to strike is fundamental, it must be restricted if it is prejudicial to public safety. In the event collective action creates a dangerous environment or could result in significant accidents (such as blocking road access), individuals are liable to be punished by the Belgian criminal code.
KEY DEVELOPMENTS FOR 2019
Increased flexibility in the labour market
The Belgian labour market is becoming more flexible. Working time, remuneration and organisational structure are evolving to improve the work-life balance of employees.
The following trends are expected for 2019:
- more flexible-reward plans: many employers have already successfully implemented flexible-reward plans in which the employees can tailor their salary and benefits to suit their own needs. It is expected that more employers will begin to do the same; and
- mobility: a law was passed introducing the “Cash for Car” mobility allowance and the Belgian Government proposed a mobility budget to enable employees who benefit from the use of a company car to exchange their cars for a cash mobility budget which can be used on other modes of transport at no extra cost to the employer. This proposal is awaiting approval from Parliament.
Voluntary occupational pension will be available for employees
From the first quarter of 2019, the Voluntary Occupational Pension for Employees (“VOPE”) has been available to employees who do not have an occupational pension scheme at industry or company level, or who contribute to an occupational pension that is lower than 3% of the pensionable salary (i.e. gross salary, subject to social security).
From a practical point of view:
- employees falling under the scope of the VOPE will be able to conclude a VOPE agreement with a pension provider (i.e. an insurance company or a pension fund).
- the employees can determine the amount of their VOPE contributions, with a maximum of 3% of the pensionable salary, earned in the second year (n 2) before the year of accrual (n). The maximum VOPE contribution is capped at EUR 1,600; and
- the employers will deduct the VOPE contributions from the employees’ net salaries before to transfer the contributions to the pension providers.
Validity of notice period agreements
Since the introduction of the unified employment status between blue and white-collar employees, there is indistinctness about the applicability of the notice period agreements of "higher" and "highest" white-collar employees that were concluded before 1 January 2014.
In an important judgment of 18 October 2018, the Constitutional Court has now set a clear direction that the notice period agreements are valid and should be applied to determine the notice period. This means that if a valid notice provision was agreed, the statutory rule of one month per started year of seniority (with a minimum of three months) is not applicable if a notice period agreement is more favourable to employees.
This decision should be affirmed in 2019 by other court decisions.
KEY DEVELOPMENTS FOR 2018
Mobility Budget instead of Company Car Schemes
From 2018, employees who benefit from the use of a company car will be able to exchange their cars for a cash mobility budget which can be used on other modes of transport. The government has agreed draft legislation to implement the policy, which contains three requirements in order for the scheme to qualify:
- both employer and employee should be able to opt freely in and out of the mobility budget scheme;
- the scheme should be treated competitively with the existing schemes for company cars from a tax and social security perspective; and
- the scheme should be cost neutral for the employer, the employee and the Belgian state.
The success of the scheme will depend upon the practicality of meeting the above conditions and the actual amount of the cash mobility budget available being sufficient for employees.
Posting of Employees – Liaison Person and ‘Limosa’ Posting Declaration
Foreign employers sending employees to work on a temporary basis in Belgium must submit a ‘Limosa’ declaration form to the Belgian National Social Security Office (NSSO) and appoint a liaison in Belgium.
The liaison must be a natural person authorised by the foreign employer to provide the NSSO and their inspectors with the required information about the activities and employment conditions of the posted employees in Belgium.
On 26 July 2017, the Belgian government announced reforms which included changes to employee profit participation schemes. From 2018 onwards, employers will have the opportunity to share a portion of the company’s profits from the previous financial year with their employees, with potential advantages from a tax and social security perspective.
The distributions do not have to be the same for all the employees. The distribution procedure will vary as follows:
- If the employees receive the same amount, a general meeting and a communication of the information to the employees will be sufficient.
- If a distinction is made between the employees (e.g. the method of calculating the distributions is different), the implementation of the distributions will require a collective bargaining agreement or an ‘adhesion act’ (in the absence of union delegation within the company).
The Belgian government is considering reintroducing probationary periods under Belgian law by way of a reduction in the minimum legal notice periods during the first 5 months of employment.
The table below details the proposed periods:
|Length of employment||<1 month||<2 months||<3 months||<4 months||<5 months||<6 months|
|Current notice period||2 weeks||2 weeks||2 weeks||4 weeks||4 weeks||4 weeks|
|Proposed notice period||1 week||1 week||1 week||3 weeks||4 weeks||5 weeks|
KEY DEVELOPMENTS FOR 2017
A proposal to promote more flexibility at work
The government intends to allow employers and employees to organise their relationships with more flexibility. The legislation is still in draft form but the most significant proposals relate to:
- The calculation of the average working time (38 hours/week) on an annual basis for all sectors;
- The opportunity for employees to choose to perform overtime;
- Incentives for offering training to employees;
- Occasional telework and the opportunity for employees to work from home.
In addition to these measures, other sector-specific reforms are anticipated, such as a global reform of working time, the possibility to introduce flexible work arrangements, and the creation of career-investment accounts in order to finance future career breaks or to help employees with personal issues.
Students at work
The applicable rate of social security contributions to be paid for the employment of students is lower than the standard rate if the students are employed for a limited period of time.
The maximum annual limit (as of 1 January 2017) will be 475 hours per year per student (instead of 50 days per year as previously applicable). This will allow more flexibility to students and their employers.
Evolution of salaries
At the time of writing, no decisions have been made regarding a possible (limited) salary freeze for the period 2017-2018. Following the latest communications from the government, the sanctions in cases of infringement of the salary freeze should be strengthened and the decision-making process leading to establishment of a salary freeze modified in the future.
A proposal to amend the current legislation regarding collective dismissals
The government is considering amendments to the existing legislation regarding collective dismissals. The reform will focus on mediation and modify the current process.
KEY DEVELOPMENTS FOR 2016
Tax shift: reduction of the social contributions to a basic rate of 25% and preferential treatment for the first six employees
The government intends to reduce employers’ social contributions from a 32.4% basic rate to a rate of 30% by 2016 and of 25% by 2018. In addition, it aims offer lower rate of social contributions for the first six employees of a company. This measure takes place in the framework of a global tax shift in order to improve the competitiveness of the Belgian employment market.
Important modifications concerning supplementary pensions
There have been three important changes:
- The rate of the guaranteed return of employers will be lowered to 1.75% for 2016 and 2017 and adjusted in the future by reference to the economic index;
- Where an employee exits a supplementary pension scheme, the employee will keep the right to choose life assurance ; and
- As a general rule, supplementary pensions will only be paid on the statutory retirement age.
Systematic withholding of four weeks’ pay in lieu of notice by the employer to finance outplacement
As of 1 January 2016, employers are entitled to withhold four weeks’ payment in lieu of notice in order to finance outplacement for those employees dismissed with immediate effect if the employees are entitled to an indemnity of at least 30 weeks of remuneration. Since 2016, an employee has been able to refuse the offer of outplacement but the employer will not have to pay the complete indemnity in lieu.
The payment of salary cash in hand is forbidden
The payment of salaries by bank transfer was made mandatory on 1 October 2016.
Increase of the employer’s social contributions for unemployment benefit
In order to discourage early retirement, the employer social contributions has increased by 2.25% for the market-sector and by 1.25% for the non-market sector. This system allows dismissed senior employees to retire from the employment market with the benefit of an unemployment allowance together with an additional contribution from their former employer.