Impact Wage Bracket 2013-2014 on Remuneration Policy

In view of the budgetary measures for 2013-2014, the Belgian Government decided to maintain the automatic indexation mechanism, but to apply a wage bracket of 0% for 2013 and 2014.

While the details of this scheme have not yet been disclosed, it is to be expected that this measure will be implemented in the same or in a similar manner as the wage bracket of 2011-2012.

The wage bracket of 2011-2012 was based on the Law of July 26, 1996 for the promotion of employment and the preventive protection of the competitive capability (Wet tot bevordering van de werkgelegenheid en tot preventieve vrijwaring van het concurrentievermogen/Loi relative à la promotion de l'emploi et à la sauvegarde préventive de la compétitivité) (the “Law”), which is still in force.

The purpose of the Law is to promote employment and to protect Belgium’s competitive position on the market by avoiding that the salary cost borne by Belgian business increases more than the average salary cost in Belgium’s neighbouring countries, i.e., Germany, France and The Netherlands.

In principle, the social partners must determine a margin within which the average salary cost in Belgium is allowed to increase. This is the so-called “wage bracket”. In practice, this wage bracket is defined in a collective bargaining agreement, concluded between the social partners every two years.

As the social partners did not reach an agreement on the wage bracket for 2011-2012, the government decided to intervene and to determine unilaterally a wage bracket in a Royal Decree of 28 March 2011.
Contrary to the agreements between the social partners, the wage bracket determined by the government is not a guideline, but a binding obligation for each employer. For 2013-2014, the government determined the wage bracket at 0%, which implies that the salary cost will not be allowed to grow.

The salary cost includes the gross salary, premiums, vacation pay, termination indemnities, group insurance premiums, employer social security contributions and all other benefits such as meal vouchers, eco cheques, gift vouchers, etc.

Article 9 of the Law provides that “the wage bracket cannot be exceeded by agreements at inter-sectoral, sectoral, company or individual level”.

It is unclear whether this provision should be interpreted as meaning that no individual increases can be agreed upon that exceed the wage bracket at individual level or at collective level.

If the wage bracket of 2013-2014 is based on this legislation, there will also be exceptions, such as indexation, baremic increases, benefits from employee participation plans, innovation premiums, premiums and contributions in a social pension plan, salary increase due to increase in workforce and tolerated exceptions (based on a memorandum of 1997 of the government) such as harmonisation of employment conditions due to a transfer of undertakings, application of new collective bargaining agreements at sectoral level because of a change of Joint Committee, increase due to overtime and severance pay on top of the legal minimum.

It is also possible to decrease the salary cost by optimising the salary package of the company so that the company is able to increase the salaries without increasing the salary cost.

Any employer who exceeds the maximum margin of the wage bracket is liable to pay an administrative fine and the agreement which leads to the exceeding of the wage bracket can be declared null and void.