Index Jump and Salary Freeze

At the end of last month two acts on wage indexation and the salary freeze, respectively, were published in the Belgian State Gazette.

These measures have been taken by the government in order to maintain the competitiveness of Belgian businesses compared to neighbouring countries and to reduce the wage handicap.

The Act of 23 April 2015 on wage indexation was published in the Belgian State Gazette on 27 April 2015. The second section of the act provides for a one-time skipping of automatic (2%) wage indexation (the so-called "index jump").
The act first defines the terms “health index” and “smoothed health index”. The health index is a monthly index which differs slightly from the consumer price index. Thus, certain products included in the consumer price index (for example, alcoholic beverages, tobacco, etc.) are not included in the health index. The smoothed health index is defined as the arithmetic mean of the last four health indices.

In order to enforce the index jump, the act distinguishes between three periods, namely: the period before suspension of the smoothed health index, the period of suspension of the smoothed health index, and the period following suspension of the smoothed health index. With regard to the first period, until March 2015, the smoothed health index is calculated as indicated above. In the second period (from April 2015 until the lifting of the suspension), the smoothed health index is set at the March 2015 level. However, during this period, a reference index is tracked equal to the smoothed health index multiplied by 0.98. The third period starts the month (the so-called "reference month") in which the aforementioned reference index surpasses the March 2015 smoothed health index. At that time, the 2% index jump will be achieved, and consequently the suspension will be lifted. Please note that the act expressly excludes the (theoretical) possibility of negative wage indexation from April 2015 until the reference month.

To give the index jump lasting effect, the law provides that as from the reference month, the smoothed health index will be calculated by multiplying the arithmetic mean of the last four health indices by 0.98.

Violation of the abovementioned provisions on the index jump by an employer, his servants or agents is punishable by a criminal fine of EUR 300 to EUR 3,000 or an administrative fine of EUR 150 to EUR 1,500. These fines are multiplied by the number of employees affected by the violation.

The act entered into effect on 27 April 2015.

The Act of 28 April 2015 on the salary freeze was published in the Belgian State Gazette on 30 April 2014 and determines the margin for wage increase (the so-called "wage norm") for 2015-2016.

Unlike previous years, the wage norm is determined per year, i.e. for 2015 and again for 2016.

For 2015, the act sets the gross average wage cost within a company at 0%, meaning wages will be frozen, as was the case in 2013-2014. Consequently, the average labour cost per full-time employee may not be increased. However, this does not mean that it is impossible to increase individual wages. Existing wage scale increases, overtime, non-recurring results-based benefits, etc. all remain possible, to cite but a few examples.

For 2016, a maximum gross change of 0.5% in the salary cost (possibly increased by 0.3% of the net salary cost) is possible.

An employer who violates the wage norm provisions will be sanctioned with an administrative fine of EUR 250 to EUR 5,000.

The act entered into effect on 30 April 2015. Therefore, it could be agreed that pay rises before 30 April 2015 were without problem possible.

Unlike previous years, in which a salary freeze was implemented but wages could be increased as a result of indexation, the current combination of the salary freeze and the index jump should in principle ensure that wages in 2015 and 2016 will scarcely rise.