Most workers in the Belgian labor force are covered by collective agreements established by joint commissions (JCs), which provide for salary indexation (i.e., automatic adjustment) based on inflation, among other compensation-related entitlements and employment conditions. There are 164 JCs (including sub-commissions), set up by sector or geography — or both. The largest in the private sector is the national multi-sector JC 200, which covers around 60,000 companies and 500,000 employees.
In 2021, Belgium had the third-highest labor cost per worker in the European Union (EU), behind Denmark and Luxembourg. While salary indexation can contribute to higher labor costs, it has been less of an issue in recent years, as successive Belgian governments have negotiated national pay agreements capping wage growth to promote competitiveness, aided by past low inflation rates. In the 10-year period from 2013 to 2022, salary indexation under the JC 200 agreement averaged only 1.43% per year. Now, with consumer price inflation at levels not seen since the mid-1970s, the resulting salary indexation rates will leave employers facing hefty increases in labor costs in 2023.
The JC 200 agreement provides for one indexation of salaries each year, on January 1, with the rate typically finalized in December. Based on inflation data through September, employers covered by JC 200 could be required to increase salaries by more than 11% on January 1, 2023 (based on monthly year-on-year price inflation data published by the Federal Planning Bureau). Corresponding increases under many other JC agreements could be at a similar level. All JCs use a common measure of inflation (i.e., change in the official “health index,” a component of the consumer price index, as measured by the Belgian statistical office), though they may differ substantially in how they calculate and apply the resulting increase (e.g., number and timing of increases during the year, pay to which the increase is applied and possibly different approaches for different employee groups).
To soften the cost impact for employers, the federal government has decided to waive employer social security contributions from January to June 2023 on that portion of pay resulting from 2023 salary increases and to allow employers to defer July to December 2023 contributions on such pay until 2025. According to government estimates, the measure for the first two quarters of 2023 should save employers around 1 billion euros in social security contributions.
Employers should monitor salary increase projections under the relevant JC agreement, if any, and prepare for high indexation rates in 2023. As of September 2022, year-on-year monthly inflation was 12.1% — the second-highest among Western European EU states, after the Netherlands — pushing up the health index and corresponding projections for indexation. Such salary increases would be not only historically high in Belgium but also significantly higher than projected increases in many other EU member states, undermining competitiveness and also affecting the use of merit-based pay increases.
