Protection indemnities again exempt from social security contributions

Federal Government reverses measure to no longer subject protection indemnities to social security contributions.

In our Newsflash of 28 August 2013, it was announced that the majority of indemnities due when an employment contract is terminated (so-called “termination indemnities”) would become subject to ordinary social security contributions. This measure was implemented by the Royal Decree of 24 September 2013 and entered into force on 1 October 2013.

The main reason for this change in legislation was to put a stop to social security contributions’ evasion. From time to time, indemnities in lieu of notice (which are subject to contributions) were “replaced” by other indemnities, such as non-compete indemnities (exempt from contributions).

In addition, the Royal Decree of 24 September 2013 also made protection indemnities subject to social security contributions. These are indemnities to which certain employees (e.g. pregnant women, employees on career break or time credit, parental leave, etc.) are entitled if they are dismissed on these grounds.

Following heavy criticism, the Federal Government decided to reverse this measure with retroactive effect from 1 October 2013 (Royal Decree of 21 December 2013). Consequently, protection indemnities are again exempt from social security contributions. However, the government did not change its position regarding clientele and non-compete indemnities.

The reinstatement of the exemption from social security contributions goes hand in hand with the elimination of the incompatibility between protection indemnities and unemployment allowances. Hence, protection indemnities can again be combined with unemployment benefits. Schematic overview after the Royal Decree of 21 December 2013:

Nicolaas Vermandel, Advocaat-vennoot/Avocat-associé, Tel.: +32 2 800 70 77, E-mail: nvermandel@laga.be   

Bert Croimans,  Advocaat/Avocat, Tel.: +32 2 800 70 25, E-mail: bcroimans@laga.be