19/12/18

Higher cost of dismissal as from 2019?

The Unified Status Act, which entered into force on 1 January 2014, gave the social partners 5 years to agree on industry-specific measures to enhance the future employability of dismissed employees. If no such measures are agreed on by 1 January 2019, an additional social security contribution can become due in the event of dismissal by the employer.

Unified Status Acts – employability

In order to optimise the future employability of dismissed workers, the Unified Status Act of 26 December 2013 introduced a general obligation to provide outplacement to every employee who is dismissed with a notice period or corresponding indemnity in lieu of notice of at least 30 weeks.

Moreover, the provisions of the Act instructed the social partners to agree on additional measures – e.g. training, competency mapping, outplacement … – to enhance the future employability of workers who are dismissed and to include these measures in industry-level Collective Bargaining Agreements (CBA) by 1 January 2019.

The principle for those industry-level CBAs must be that, for employees who are dismissed with a notice period or indemnity in lieu of notice of at least 30 weeks, 1/3th of said notice period/indemnity is used for employability measures. This means that 2/3th will be performed, respectively paid out, and the remainder will be used as a budget for employability measures. Such system can however not result in the part of the notice period that is actually performed or paid out dropping below 26 weeks.

Additional contribution

If, however, no industry-level CBA is concluded in this respect by 1 January 2019, an additional employee and employer social security contribution will become due when an employment agreement is terminated by the employer with a notice period or corresponding indemnity in lieu of notice of at least 30 weeks.

This contribution will equal 1% for employees and 3% for employers, to be calculated on 1/3th of either the salary during the notice period or the corresponding amount of the indemnity in lieu of notice. This additional social security contribution would of course increase the overall cost of dismissal.

Current status

Presently, no industry-level CBAs on employability measures have already been concluded and it seems unlikely that any such CBAs would still be concluded before the upcoming 1 January deadline. This would mean that the above mentioned additional social security contribution would become due as from 1 January 2019, unless e.g. a multi-industry agreement on this matter would be reached within the National Labour Council.

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