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AmCham Belgium recommends capping social charges

While the gradual, ongoing reduction of employer social security contributions from 33% to 25%, in line with AmCham Belgium’s longstanding recommendation, should stimulate job creation, the Chamber further recommends placing a cap on social charges in order to attract senior management and other high-profile positions to Belgium.

In a new position paper Increasing Belgium’s Competitiveness: Reducing and Restructuring Labor Cost, AmCham Belgium recommends (re-)introducing a ceiling of €75,000 for the calculation of employer social security contributions. Belgium suffers from a substantial ‘wage handicap’ in comparison to neighboring countries, and limitless contributions exacerbate this handicap for higher salaries. 

Not only do neighboring countries, such as the Netherlands and Germany, have lower contribution rates, they also have ceilings in place. In practice, this means that employer’s social charges ‘max out’ in these countries, while these charges increase – without limit – in Belgium in proportion to the salary. This places Belgium at a significant competitive disadvantage.

 

A ceiling, as recommended by the Chamber, would help Belgium to attract higher profile, higher wage jobs. A ceiling would also be an important step toward making Belgium a more attractive location for headquarters and decision centers.

High labor costs – at all wage levels – remain the top concern of international businesses in Belgium. AmCham Belgium therefore recommends accelerating the reduction of the social security contribution rate, which, according to the government’s current timetable, will only reach 25% in 2018. Apart from the headline rate, businesses also suffer from the administrative burden. Reducing the number and complexity of deductions as well as simplifying procedures, particularly around the partial exemption of wage withholding tax on researchers’ salaries, would be beneficial in this regard.

The Chamber recognizes that recent adjustments to the process and formulae have reduced the negative impact of automatic wage indexation on Belgium’s competitiveness. However, such a pervasive wage indexation regime remains detrimental to the Belgian economy and is largely responsible for the wage handicap. Indexation, moreover, hinders companies’ ability to motivate and reward employees with performance-based compensation. AmCham Belgium recommends applying the index to a fixed salary in order to protect lower-income households and limit its impact on the overall economy.

Download our new position paper Increasing Belgium’s Competitiveness: Reducing and Restructuring Labor Cost

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