Belgium has had salary moderation since the end of the 80s.

Under 1996 legislation, the wage increase margin has to be re-negotiated by employers’ and employee’s organisations every two years on the basis of a report produced by the Central Economic Council (CCE/CRB).

Negotiations failed for 2011 and 2012 and so the government has set the maximum wage rise for this period. It is contained in a Royal Decree of 28 March 2011.

Whereas social partners previously set a guideline figure, the new figures are compulsory: 0% for 2011 and 0,3% for 2012. This is the range available for salary cost increases over the next two years. It has to be calculated after applying compulsory indexation (to preserve employees’ purchasing power) and pay scale increases laid down in collective bargaining agreements. For 2011-2012, the CCE/CRB estimates salary indexation at 3,9%.

Pay scale increases are defined by law as “salary increases dependent on seniority, age (sic), normal promotions and individual grade changes as provided by collective agreements”. Given the fact that not all companies are using collective bargaining agreements, scale increases should also be possible under separate accords (other than collective bargaining agreements), internal policies or even custom applying within a company. These increases can be estimated at around 2% over two years.

Your sector and company may not enter into new agreements (collective or individual) that increase the average nominal hourly wage cost per full-time equivalent.

For 2012, new agreements (collective or individual) may be concluded provided they do not increase the average nominal hourly wage cost by more than 0,3% compared to 2009-2010.

At the company level, it is necessary to wait until the binding sectoral bargaining collective agreements have been signed to determine whether there is some room left for salary increase within the 0,3%.

The law does not define “average nominal hourly wage cost”. However, it should include all direct and indirect costs supported by the employer, including all employee benefits (salary, bonuses, benefits in kind, additional social security benefits, meal vouchers, ecocheques, non-recurring benefits – regardless of whether they’re paid free of social security), plus social security and the costs of employee learning & education.

Companies exceeding the margin risk a penalty (ranging from EUR 250 to 5.000, which the Ministry says should be multiplied by the relevant number of employees, up to a maximum of EUR 100.000 per company, note however that this position is open to challenge).

Companies cannot sign new agreements whose effect is to increase their nominal hourly wage cost; e.g. if you never previously gave your workforce meal vouchers, introducing them now could make you breach the margin.

Introducing a non-recurring bonus plan could also make you breach the law. You can however renew an existing plan and, provided the maximum benefits and eligible employees don’t change, it won’t exceed the margin, even if the total paid is more than in 2010 (e.g. because your results are better).

Companies must continue to honour existing agreements, and in this respect bonuses and variable pay may increase but the rules for calculating them must remain unchanged.

There are however options available to control your salary cost or to increase certain part of the salary without penalty.

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