News & Publications

Employment, Pensions, and Benefits - April 2012

Submitted By Firm: Lydian

Contact(s): Alexander Vandenbergen, Jan Hofkens

Author(s):

Date Published: 4/11/2012

Article Type: Legal Update

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Last Friday, 6  April the Programme Law I of 29 March 2012 was published in Belgium’s official journal

This e-zine already provides you with insight into a number of the important changes affecting your HR policy.

Employer contributions to old, current and new bridge pensions (or, as they are now called, unemployment schemes with business supplements) and to pseudo-bridge pensions are raised significantly.

If you work with certain contractors, you run the risk of joint liability for social security and tax liabilities and for wages due.

To keep older employees at work longer, you will be required to draw up a work opportunity plan and to respect the age pyramid in case of collective dismissal.
 

IN THIS ISSUE

  • USBS (formerly bridge pensions), Canada Dry and time credit: increased employer contributions, also retrospectively!
  • Combating fraud: joint liability in (sub-)contracting arrangements for social security and tax debts and wage debts
  • Yet another scheme: the work opportunity plan and the age pyramid in case of collective dismissal 

USBS (formerly bridge pensions), Canada Dry and time credit: increased employer contributions, also retrospectively! 

1. Scenario

Since 1 April 2010, employer contributions in the social security to USBS (the old bridge pensions) and pseudo-bridge pensions (supplements paid by the employer in cases of full unemployment (Canada Dry) and time credit, career reduction and work reduction schemes (hereafter all referred to as “time credit”) had already risen sharply due to the so-called Decava legislation.

The Programme Law increases employer contributions even more. Worth noting is the fact that the Programme Law also has implications for bridge and pseudo-bridge pensions accorded in the past.

These new rules come into force on 1 April 2012, but further adjustments are still expected. Employer and employee representative bodies (the “social partners”) on the National Labour Council (NLC) do not see eye to eye with parliament and are being given the chance until 1 July 2012 to make certain adjustments and propose alternatives to the government, which may then enact them in the form of secondary legislation (a “royal decree”).

2.   No change concerning …

There is (as yet) no change to employee withholdings. They stand at 6.5% (4.5% for the previous half-time bridge pension) and are calculated on the sum of social security benefits and the supplements paid by the employer.

There are special rules for companies undergoing restructuring and in difficulties. We presume that these rules will also be altered, but do not have any information on this for the time being.

In calculating the social security contributions for Canada Dry and time credit, it is always important to bear in mind that contributions are only due once the employer reaches his 50th birthday, up until age 65. There is no change to this (at the moment).

Nor are social security contributions due in relation to Canada Dry or time credit in (amongst others) the following exceptions, which also remain for the time being:

  • the employee had already received the supplements paid by the employer at a time before he had turned 45;
  • the employee first received the supplements paid by the employer before 1 January 2006;
  • the employee was dismissed before 1 October 2005;
  • the employee is in receipt of benefits on grounds of parental leave, palliative leave or leave to help or care for a seriously ill close or extended family member;
  • the employee receives benefits for half-time time credit for employees over 50.

For now, there are no changes either to the penalty system when the rules on resumption of work are not adhered to (possible doubling of contributions).

3.   Sharp rise in employer contributions

Employer contributions are calculated on the amount of the supplements paid by the employer, without taking account of the social security benefits.

A distinction is now drawn among three time periods:

  • old schemes:  commencement before 1 April 2010 or notice of immediate dismissal/notice period served before 16 October 2009
  • interim schemes:  commencement on or after 1 April 2010 and notice of immediate dismissal/notice period served after 15 October 2009
  • new schemes:  commencement on or after 1 April 2012 and notice of immediate dismissal/notice period served after 28 November 2011

Employer contributions rise under all schemes, including old schemes and interim schemes! Below, we give you a schematic overview of the changes.

1. Old schemes

For USBS: 10% increase. These employer contributions are on a reducing scale and go down as the employee in question gets older.

Age at end of month when                        Previous employer                               Employer contributions
contribution due                                          contributions                                          from 1 April 2012
< 52                                                                 30%                                                          33%
52 < 55                                                           24%                                                          26.4%
55 <  58                                                          18%                                                          19.8%
58 < 60                                                           12%                                                          13.2%
60 and over                                                    6%                                                            6.6%

For Canada Dry and time credit: increase from 32.25 to 38.82%. These employer contributions are fixed percentages.

Age                                                                 Previous employer                               Employer contributions
                                                                        contributions                                          from 1 April 2012
50 or over                                                      32.25%                                                     38.82%


2. Interim schemes

For USBS: 10% increase. The percentage depends on the age at which USBS commences (commencement age) and is therefore not based on a reducing scale.

Commentcement age                               Previous employer                               Employer contributions
                                                                        contributions                                          from 1 April 2012
< 52                                                                 50%                                                          55%
52 < 55                                                           40%                                                          44%
55 <  58                                                          30%                                                          33%
58 < 60                                                           20%                                                          22%
60 and over                                                   10%                                                           11%

For Canada Dry: 10% increase with an absolute minimum of 38.82%. This percentage also depends on the commencement age and is therefore not based on a reducing scale.

Commentcement age                               Previous employer                               Employer contributions
                                                                        contributions                                          from 1 April 2012
50 < 52                                                           50%                                                          55%
52 < 55                                                           40%                                                          44%
55 <  58                                                          30%                                                          38.82%
58 < 60                                                           20%                                                          38.82%
60 and over                                                   10%                                                          38.82%

For time credit: fixed percentage changes from 32.25% to 38.82%

Age                                                                 Previous employer                               Employer contributions
                                                                        contributions                                          from 1 April 2012
50 or over                                                      32.25%                                                     38.82%


3. New schemes

The percentages for new USBS and Canada Dry schemes rise sharply. The percentage depends on the commencement age.

Commencement age                                USBS                                                        Canada Dry
< 52                                                                 100%                                                       100%
52 < 55                                                           95%                                                          95%
55 <  58                                                          85%                                                          85%
58 < 60                                                           55%                                                          55%
60 and over                                                   25%                                                          38.82%

For time credit: fixed percentage of 38.82%

Age                                                               Employer contributions from 1 April 2012
50 and over                                                 38.82%


4. Concerns

The new conditions and the high level of employer contributions will imply that considerably less use will be made of USBS and Canada Dry. It remains to be seen whether the budget objectives these changes are intended to achieve, are actually reached (revenues of EUR 14 million). In any event, the alternatives put forward by the NLC may not result in less revenue being raised.

The NLC advocates no change to the employer contribution percentages for current arrangements or arrangements that are the result of previous collective dismissals. Employers that set down a budget in the past to meet their USBS, Canada Dry or time credit commitments, might suddenly be faced with funds shortages, which could have serious consequences. For many firms, large numbers of employees are affected, whether or not in the context of a redundancy scheme for a collective dismissal. The government has stated that, although the NLC can propose adjustments, changes to the contributions must relate to bridge pension periods embarked on in both the past and the future. How the division is made between those two periods, is something the NLC can decide itself. Current arrangements will most likely be affected, though mitigations  to the envisioned changes cannot be ruled out.

One can also wonder whether the intention is to re-calculate all (partly) capitalised past payments, so that and additional payments would have to be made to the social security instances. For many companies, this would not only be a very difficult exercise in practice, to put it mildly, but it would knock the financial wind out of them. Not to require any additional payment seems impossible as well, since this would imply an unjustified advantage in comparison with monthly payments (up to age 65). 

Combating fraud: joint liability in (sub-)contracting arrangements for social security and tax debts and wage debts 

For social security and tax debts, the existing system of joint and several (alternative) liability and withholding duties for employers in the building and real estate sector is extended to other risk sectors. The scope of application has yet to be set down by the Crown but likely candidates include hotels/restaurants/cafés, butchery, the security sector and cleaners. Individuals engaging contractors for private purposes are excluded. 

The liability is alternative:  in case a company is not complying with its obligations on several liability, the contractor on top of the non-complying company will be held liable for the debts. In that way, one is climbing up in the chain to the top. 

A system of liability is also being introduced in certain risk sectors for wage debts. This entails amendment to the Pay Protection Act. The scope of application has yet to be fixed by Royal Decree, but it is likely that it will be the same sectors that are targeted as for social security and tax.

Each employer engaging a contractor in a risk sector may be subject to liability for wages where a (sub-)contractor fails to pay wages to his workers in time. Individuals engaging contractors for private purposes are excluded.

However, liability is only triggered 14 days after notice has been given by the manpower inspectorate and only applies where there have been serious shortcomings in the payment of wages (e.g. non-payment of the minimum wage). The liability is subject to a time limit of one year. If you can prove that the working time of the employee in question is limited to a certain number of hours for which work was done for you, then your liability is also limited to the wage for that number of hours.

It is important that you can exclude liability for wage debts provided you include specific provisions in the contract with your (sub-)contractor. For instance, you can break a chain of liability by stipulating that the arrangement with your direct contract partner terminates upon receipt of notification by the manpower inspectorate. You can also, for instance, contractually deem the notification from the inspectorate to be a condition precedent. Further details will be set out in a subsequent royal decree.

We therefore advise you to revisit your contracts with contractors and sub-contractors in risk sectors and amend them if necessary.

The fight against sham self-employment does not form any part of the Programme Law, but an adjustment to the Work Relations Act was approved by the government on 29 March. The aim is to detect sham self-employment more easily and counter it more efficiently. A presumption of employment will be determined inter alia by economic dependence criteria. The sector-specific criteria characterising the work relationship can be fixed more easily and faster. Whether the new rules will apply generally is unclear. It seems from initial reports that a number of sectors are targeted, such as builders and cleaners, security and guard services and the transport sector.

Yet another scheme: the work opportunity plan and the age pyramid in case of collective dismissal

In order to keep older employees at work longer, firms with over 20 employees are obliged to draw up a work opportunity plan and to respect the age pyramid in case of collective dismissal. How both obligations will be made concrete and as from when the obligations will apply, is unclear. The NLC can put up an alternative mechanism before 1 July 2012. At the moment, therefore, you should wait and see which way the cat jumps. We will keep you abreast of what initiatives the NLC takes, but wanted to let you know at this stage what the main thrusts of the work opportunity plan and the pyramid age were.

A work opportunity plan sets out what efforts a company is making to keep employees aged 45 and over at work or to recruit such individuals.

The Federal Public Service Employment, Work and Social Dialogue will develop a model employment scheme.

The plan comprises two sections. The first section contains the company’s specific measures on:

  • the selection and hiring of new employees;
  • development of the skills and qualifications of employees, including access to training;
  • career development and mentoring within the firm;
  • possibilities of horizontal mobility enabling people to move to positions suited to their changed abilities and skills;
  • the possibilities of adjusting working time and conditions of work;
  • the health of the employee, the prevention and elimination of physical and psycho-social barriers to remaining in work;
  • systems for recognising acquired skills.

This list is not comprehensive and may be added to by royal decree.

The second section comprises an evaluation of the previous year’s plan.

Work opportunity plans must be submitted no later than 31 March each year to the works council, failing which the health and safety at work committee, failing which the trade union chapter, failing which the workforce itself, who then have a month to formulate an opinion. The employer can further amend the plan on the basis of the opinion.

You will have to keep the plans from the last five years on file and make them available to manpower inspectors and authorised government agencies, producing them on request.

The content, production and record-keeping requirements can be varied by royal decree for companies with a workforce of between 20 and 50.

At present, there are no penalties for companies that fail to comply with the plan rules. Penalties will likely be introduced once the NLC presents an alternative proposal.

Age pyramid

The Act on diverse dispositions of 29 March 2012 contains the principles of the age pyramid in case of collective dismissal.

Companies with more than 20 employees and starting the procedure of collective dismissal must divide the number of dismissals between three age groups (<30, 30-49 en ≥50).

The employer will no longer be entirely free in determining which employees will be dismissed. The age composition of the dismissed employees must be a mirror of the total number of employees within the company.

The legislator intends to put a stop to the practice that older and more expensive employees are object of a collective dismissal.

In case you do not comply with the age pyramid, you will lose for the quarter of announcement of the collective dismissal and for seven preceding quarters, the right to the structural and target group reductions for the payment of social security contributions for all employees aged over 50 and dismissed as a consequence of the restructuration.

The mirror principle is tempered in three ways:

  1. Per age group, there is a tolerance margin of 10 % of a strict proportional spread of the dismissals.
  2. In case a collective dismissal does not affect the entire company, but only one or more divisions or one or more activity sections, the number of dismissals must only be a mirror of the work force at the level concerned.
  3. Employees with a so-called “key function” are excluded from the calculation. What a key function is, is not clear. However, the parliamentary proceedings refer to the same notion in the CBA 77bis on time credit.

Further rules and the procedure to be followed must be determined by Royal Decree (concrete calculation, definition of some notions (like division and activity section), de competent control authority, etc.).

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