How to remedy the high cost of social security contributions paid by employers in belgium
Belgium remains one of the most expensive countries worldwide to employ and reward people. In light of the upcoming elections, AmCham Belgium calls on the next governments to introduce a cap on the social security contributions paid by employers.
In Belgium, social security contributions for employers are uncapped: they increase in proportion to the salary, without limit. This makes it very costly and difficult for employers in Belgium to employ and reward (highly qualified) people. Labor costs remain the number one concern of the international business community in Belgium, despite the positive impact of the 2015 tax shift. The next governments should introduce a cap on social security contributions for employers, which will boost Belgium’s attractiveness and competitiveness.
Introducing a ceiling on employer social security contributions is a key recommendation in our 2019 Priorities for a Prosperous Belgium (#PPB19). This builds on AmCham Belgium’s long-standing recommendation to reduce the financial burden on employers. The tax shift gradually decreased the social security rate from 33% to 25%, a step in the right direction. However, today Belgium is still one of the most expensive and restrictive countries worldwide to employ staff. It is ranked third-but-last (138 out of 140) in the World Economic Forum’s (WEF) Global Competitiveness Index for its labor tax rate.
"In order to be more competitive with our neighboring countries, the labor cost in Belgium needs to be reduced. The high and uncapped social security contributions are the biggest concern for foreign investors when they want to hire employees in Belgium. Introducing a cap on social security contributions for employers and reducing the personal income tax for employees would stimulate companies to invest in Belgium and allow them to attract highly qualified employees."
An De Reymaeker, Tax Lawyer & Partner, Vandendijk & Partners, Chair of the Employee Tax Subcommittee
Belgium is known for its talented, highly skilled, multilingual and productive workforce, which has attracted foreign direct investment (FDI) to the country. However, this competitive advantage is diluted by the heavy financial burden placed on companies. If Belgium wants to become more attractive for international companies, and increase its share of FDI, now is the time to act.
While a further reduction of labor costs for all employees is needed, the introduction of a ceiling for employer social security contributions will stimulate job creation particularly for more specialized and senior positions, which has a positive spill-over effect on employment at lower skill levels and investment in general. Moreover, the ceiling would bring Belgium to a level playing field with its main competitors, which already have a ceiling in place.
In its new position paper, AmCham Belgium recommends adjusting the basis upon which social security contributions are calculated, by introducing a ceiling. Based on our calculations and benchmarking with neighboring countries, we propose the following:
➡️Introduce a ceiling of €88,000, in line with the maximum ceiling for social security contributions for independents (2019);
➡️Introduce a ceiling based on 1.5 or 2 times the ceiling for pension benefits for employees, with a maximum of €110,000.
AmCham Belgium calls on the next governments to introduce a cap on employer social security contributions, in line with our neighboring countries, to increase Belgium’s attractiveness for foreign direct investment, and to offer more attractive employment conditions for both employees and employers.
A special thanks to the members of the Employee Tax Subcommittee for the work they did on the position paper proposing the introduction of a cap on social security contributions for employers.