Belgium: Wage flexibility and collective bargaining
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In Belgium, a “variable pay” used to be a part of the salary. Even if there are similarities, there exist almost as many variable pay systems as the number of companies, which use it. There is no specific law regulating this kind of profits. Thus, general dispositions relative to labour contract and to salary are the main reference in this matter. As far as we know, no specific sectoral dispositions have been negotiated in the steel and banking sectors. Agreements on variable pay systems are negotiated at enterprise level. Even if variable pay systems are generally used for high professional profiles, they are more and more used for lower profiles as well.
Section 1. Variable pay: forms, basic data and trends
1) What are the main types of variable payments systems (VPS) used in:
The steel sector is particular in Belgium, because it unites only few companies (less than 10) but a huge number of workers (more than 4,000 workers per company). More than 70% of the 17,156 workers are blue-collar workers, the other 30% being either white-collar workers or managers. Further to this structural situation, there is an important competition between the companies and at least one trade union does exist in each company –with high affiliation rates and a culture of collective bargaining.
The banking sector is essentially constituted by large companies and includes 99.7% of - generally high qualified - white-collar workers and managers.
2) For each type of VPS, please provide information on their quantitative significance as a proportion of earnings.
By “variable pay”, in Belgium we do not understand a salary entirely dependent on worker’s performance, but a part of the salary, which could be variable – except for commercial representatives, who could be paid partially or totally in percentage fees. Usually the fixed part of the salary is higher than the variable part.
There are almost as many variable pay systems as the number of companies, which uses it. Nevertheless, similarities do persist. In fact, there are three trends in this field:
• Variable pay in relation with the profit done on an individual basis;
• Variable pay in relation with the overall profit of the company;
• Variable pay in relation with the profit done on a collective basis (i.e. of the team).
These three systems could be mixed within a same company. Other criteria could also been taken into account, such as qualitative items (e.g. satisfaction of colleagues).
There is no specific law regulating this kind of profits. Thus, general dispositions relative to labour contract (law of the 3rd of July, 1978) and to salary (law of the 12th of April, 1965) are the main references in this matter.
Besides this, a financial participation of workers to capital and profits of the company could also exist.
Workers’ financial participation to capital and profits of the company is regulated by the law of the 22nd of May, 2001. This law set up a plan of financial participation under some conditions:
- Existence of a collective agreement relative to wages;
- Prohibition for the plan of participation to replace existing advantages (i.e. the participation does not replace salary);
- Absence of negative influence on employment.
- a specificity of the law is the necessary accession of the workers to the participation system. Overall, exigencies relative to the minimum monthly salary have to be respected.
Even if variable pay systems are generally used for high professional profiles, they are more and more used for lower profiles. In this case, variable pay is more often related to collective profit of a team or of the company.
The extra-legal advantages (e.g. meal tickets, professional car, group insurance, etc.) represent a large part of workers’ salary in Belgium. According to a study of SD Worx, 20% of employees’ and managers’ total salary are extra-legal advantages, which total gross salary includes approximately 80% of cash, of which 4% is paid on a flexible base. 39% of employees and managers would have two extra-legal advantages.
3) What have been the main trends in VPS in recent years?
a) which types of scheme have become more prominent / widespread? b) which types of scheme have become less widespread?
Besides the trends explained here above, there is a brand new trend (from the 1st of January, 2008), which modifies the Belgian law on variable pay system and proposes extra fiscal advantages. The collective agreement signed on the 20th of December, 2007 concerns more particularly the bonus given to workers. Rudi Thomaes, delegate administrator at the Belgian Federation of Employers (Fédération des Entreprises de Belgique/Verbond van Belgische Ondernemingen, FEB/VBO), said that “the new system allows the employer to pay the workers outside the current framework, which is too rigid. Companies have always been interested in a pay system, which encourages workers’ implication and motivation”. Bonus depend on results objectively measurable (not only financial) and thus, are not of a structural nature. Moreover, the advantage (maximum 2,200 Euro per year) is completely fiscally exonerated for the worker. For the employer, the entire cost of this kind of advantage is totally tax-deductible, which allows an access for SMEs.
The Belgian Finance Federation (Fédération belge du secteur financier/Belgische Federatie van de Financiële sector, Febelfin) observes that lately, banks developed their own salary systems adapted to their specific needs. The trend is to introduce in these salary systems developed at entreprise level, elements of flexible pay based on individual (by evaluation) and/or collective competencies (by definition of business line) and/or results of the company.
Case study: Fortis, the first bank of the country
Fortis just established a new system of variable pay. From 2008, “the objective is to set up a stronger culture of performance”, says Vincent Vanwijnsberghe, a representative of Fortis. “Fortis is the results of different acquisitions with different pay systems. The new payment system aims also to apply the same salarial structure for the whole group”. Thus, all the employees of Fortis receive now a fix part and a variable part of salary, which depends on individual performances, business unit performances and the profit done by Fortis. In order to fix the system, classification of roles has been created. Each collaborator knows exactly in which category he or she is. For the middle management, the annual salary could almost increase with 16%.
In fact, Fortis is the first Belgian company (the biggest private Belgian employer), which anticipates the effects of a European directive transposed into Belgian law in May 2007. This directive prohibits all discrimination (notably wage discrimination) based on the workers’ age.
Section 2. Wage flexibility and collective bargaining
Please state, for each sector,
i) whether it is governed by single or multi-employer collective bargaining arrangements;
As far as we know, no specific sectoral dispositions have been negotiated in the steel and banking sectors. Agreements on variable pay systems are decided at enterprise level.
In the steel sector, the tradition and sector characteristics encourage the negotiation in a decentralised way (in companies) all the matters relative to financial topics. Qualitative issues are discussed at sector level, such as training, working conditions, etc. Nevertheless, a minimum salary is set up by the sector, even if this salary is rarely used. Indeed, workers concluded agreements at company level, which offer salaries that are more advantageous as well as bonuses. One can conclude that wage policy is bargained at company level.
Classifications of roles and salaries are thus established by agreements at company level. Stronger relation between salary and individual competences and/or objectives set up by the company is the current trend.
Besides this kind of bonus, other benefits are given, which are related to working conditions (e.g. shift work, night work, etc.) Again, these benefits are typically discussed at company level, notably because they are in line with objectives of the company and because different systems do exist.
In the banking sector, classification of roles and salaries have been created within several large companies and then, at sector level some 30 years ago. Wages at company level respect the minimum salary set up by sectoral agreements. Sectoral negotiation only concerns salary increases. The only bonus set up at sector level is a kind of “thirteen month’s wage”: the “bonus of gratification of the end of the year”. This bonus already existed a long time ago at company level before being compulsory at sector level in 1997.
In July 2007, social partners have signed a collective agreement aiming to introduce a new salary policy in the banking sector. One of the objectives is to cancel the wage categories in line with the worker’s age. Another objective is to build a framework to companies, which want to define their own salary system. At sectoral level, social partners wish to develop a new indexation system for at the latest, the 1st of January 2009. The agreement plans also the possibility for the banks to develop, at company level, their own salary system.
The sectoral agreements do not foresee a flexible pay. Such flexible pay has been set up within some companies of the sector, such as systems of salary directly related to results and/or evaluations. Thus, evolution of salaries depend less on a category system than on other indicative criteria. At company level, a series of bonuses are decided, such as salary for overtime, bonus for team work, bonus of gratification, beneficiary participation, etc. It is not easy to estimate the importance of these types of bonuses because of their direct relation to special company cases.
ii) The coverage (percentage of companies and employees) of collective bargaining
In the banking sector, manual workers (i.e. 0.2% of the total workforce), employees (55.1% of the total workforce) and managers (40% of the total workforce) are concerned by sectoral collective agreements.
| 01.01.2007 |
| Direction | 2,987 | 4.7% |
| Managers | 25,393 | 40% |
| Employees | 34,961 | 55.1% |
| Manual workers | 153 | 0.2% |
| TOTAL | 63,494 | 100% |
iii) The percentage of the workforce that is female
In the steel sector, there is a large majority of male workers; essentially due to the work characteristics (i.e. shift work, week-end work, heavy work, etc.). However, there are approximately 22% of female workers, who work as laboratory technicians, administrative staff, accountants, etc.
In the banking sector, women represent a majority within the employees (i.e. 59.41% of the total workforce). In the management roles, female workers count for 33.19% of the total workforce.
2. Wage flexibility under single-employer bargaining
1) Are there any recent instances in either/both sectors of wage freezes or wage increases below inflation concluded under company wage agreements, with unions and/or works councils?
This can be the case in the steel sector, where production tools and different forms of work organisation may lead to companies having different levels of profit. Thus, their possibility to negotiate salaries varies from one company to another.
Variable pay systems vary according to the companies. For example, there are companies, whose financial advantages are in line with the final results done on an individual basis. Other companies propose a variable part of the workers’ salary, which depends on the final results of the company or the whole group where there are the same product ranges. A third case concerns companies where qualitative objectives are the main criterion to set up variable pay system, such as a norm of quality, preventive plan (i.e. health and safety at work), and respect of social peace agreements.
2) In the relevant sector(s), are organisations without collective bargaining
a) any more likely to implement wage freezes or below-inflation increases to base pay?
ND
b) more or less likely to use VPS than organisations covered by collective bargaining?
ND
3) Are VPS in the relevant sector(s) regulated by provisions in company agreements with unions and/or works councils?
a) what types of variable pay are covered by company agreements? b) what form does such regulation take? E.g. does it specify procedural rules? Does it specify the substantive dimension of variable pay? c) what, if any, recent changes have there been in the types of scheme covered by company agreements?
In the banking sector, classification of roles and salaries have been created within several large companies and then, at sector level some 30 years ago. Wages at company level respect the minimum salary set up by sectoral agreements. Sectoral negotiation only concerns salary increases. The only bonus set up at sector level is a kind of “thirteen month’s wage”: the “bonus of gratification of the end of the year”. This bonus already existed a long time ago at company level before being compulsory at sector level in 1997.
In July 2007, social partners have signed a collective agreement aiming to introduce a new salary policy in the banking sector. One of the objectives is to cancel the wage categories in line with the worker’s age. Another objective is to build a framework to companies, which want to define their own salary system. At sectoral level, social partners wish to develop a new indexation system for at the latest, the 1st of January 2009. The agreement plans also the possibility for the banks to develop, at company level, their own salary system.
The sectoral agreements do not foresee a flexible pay. Such flexible pay has been set up within some companies of the sector, such as systems of salary directly related to results and/or evaluations. Thus, evolution of salaries depend less on a category system than on other indicative criteria. At company level, a series of bonuses are decided, such as salary for overtime, bonus for team work, bonus of gratification, beneficiary participation, etc. It is not easy to estimate the importance of these types of bonuses because of their direct relation to special company cases.
4) Are there any examples of company-level agreements concerning provision for individual employees to make choices trading an element of wages against either working time (hours/ holidays) or deferred income (pension contributions)?
a) details of the ‘cafeteria’ provisions involved, including the proportion of wages available for trade-offs; b) information on the take-up by employees covered by such agreements;
ND
5) Are there instances of any of the above forms of wage flexibility becoming the focus of industrial disputes in the applicable sector(s)?
ND
6) Is there any evidence or debate about a gender dimension to wage flexibility, in terms of its effects?
ND
Section 3. Views of social partners and government
3a Employers’ organisations
1) Under multi-employer bargaining arrangements, Is enhancing scope for ‘downwards’ flexibility in basic wage levels (e.g. via hardship clauses etc.) a prominent objective for employers’ organisations?
a) what specific proposals are being advanced (e.g. for changes to the procedures governing collective bargaining)? b) what are the main reasons being advanced? c) is there any evidence of an organisational rationale or effect (e.g. retention or expansion of the employer association’s membership)?
ND
2) Under multi-employer bargaining arrangements, is enhancing scope for ‘upwards’ wage flexibility through greater scope for supplementary negotiation at company level a prominent objective for employers’ organisations?
a) what specific proposals are being advanced? b) what are the main reasons being advanced?c) is there any evidence of an organisational rationale or effect (e.g. retention or expansion of the employer association’s membership)?
ND
3) Is the promotion of wage flexibility through VPS a prominent objective for employers’ organisations?
a) which types of VPS are being promoted? b) what are the main reasons advanced by employers’ organisations for promoting these different types of VPS?
In general, employers promote variable pay in relation with the profit done on an individual basis, which is an excellent incentive for a worker. However, even if many companies claim that they use a variable pay system, criteria are often arbitrary and set up by the hierarchical superior.
In the banking sector, the employers’ demand is to keep a sectoral minimum salary, which does not hamper the development of a system at company level. Moreover, they would appreciate a uniform salary system a the group of employees with the same kind of activities, in order to facilitate the internal mobility of employees inside the company.
4) At organisational level, in each of the two sectors, what are the key rationales leading companies to implement each type of VPS, as applicable? 5) Have employers’ organisations considered or addressed any potential gender dimension to wage flexibility, whether in terms of rationale or effects?
In the steel sector, there is a large majority of male workers; essentially due to the work characteristics (i.e. shift work, week-end work, heavy work, etc.). However, there are approximately 22% of female workers, who work as laboratory technicians, administrative staff, accountants, etc. As far as we know, there is thus no gender dimension adapted to wage flexibility.
The collective agreement negotiated in July 2007 for the banking sector plans to set up a new salary system, which will allow the companies to develop a salary system adapted to their specific needs.
3b Trade unions
1) What is the position of trade unions towards proposals aimed at enhancing the scope for downwards wage flexibility?
In general, trade unions prefer to negotiate wages at inter-professional level; they demand a distinction between the indexation and the increase of the purchasing power.
2) Where applicable, how have trade unions sought to regulate use of any increased scope in sector agreements for downwards wage flexibility?
ND
3) Under multi-employer bargaining arrangements, is enhancing scope for ‘upwards’ wage flexibility through greater scope for supplementary negotiation at company / organisational level a prominent objective for trade unions?
a) what specific proposals are being advanced? b) what are the main reasons being advanced?c) is there any evidence of an organisational rationale or effect (e.g. retention or expansion of union membership)?
ND
4) What is the position of trade unions towards each type of VPS? What objectives have they pursued in negotiations and consultation over the introduction and operation of different types of VPS?
ND
5) Have trade unions considered or addressed any potential gender dimension to wage flexibility, whether in terms of rationale or effects?
ND
3c Role of Government
1) Have there been any recent government policy initiatives to promote ‘downwards’ or ‘upwards’ wage flexibility, or variable payments systems?
2) Are there any legal provisions which regulate any of the different types of VPS?
3) Are there any fiscal incentives aimed at promoting the take up of different types of VPS?
For the questions 1), 2) and 3):
There is a brand new trend (from the 1st of January, 2008), which modifies the Belgian law on variable pay systems and proposes extra fiscal advantages. The collective agreement signed on the 20th of December, 2007 concerns more particularly the bonus given to workers. Rudi Thomaes, delegate administrator at the Belgian Federation of Employers (Fédération des Entreprises de Belgique/Verbond van Belgische Ondernemingen, FEB/VBO), said that “the new system allows the employer to pay the workers outside the current framework, which is too rigid. Companies have always been interested in a pay system, which encourages workers’ implication and motivation”. Bonuses depend on results objectively measurable (not only financial) and thus, are not of a structural nature. Moreover, the advantage (maximum 2,200 Euro per year) is completely fiscally deductible for the worker. For the employer, the entire cost of this kind of advantage is totally tax-deductible, which allows an access for SMEs.
4) Have there been any significant developments in wage flexibility, as broadly defined in the introduction, in the public sector in recent years?
ND
5) Has the government considered or addressed in any way the potential for forms of wage flexibility to have differential impacts according to gender?
ND
Commentary by the NC
In Belgium, the extra-legal advantages (e.g. meal tickets, professional car, group insurance, etc.) represent a large part of workers’ salary in Belgium. This situation could be generated by the fact that, as claimed by the OECD, “Belgium has a heavy tax burden which has mainly fallen on labour as international tax competition has limited the scope to which this burden could be imposed on capital. This has raised concerns about possible adverse labour market impacts from such high tax rates. (…) The government should also continue to reform the corporate tax system to ensure that Belgium remains an attractive site for direct investment”.
From the 1st of January, 2008, there is a brand new trend, which modifies the Belgian law on variable pay system and proposes extra fiscal advantages. The collective agreement signed on the 20th of December, 2007 concerns more particularly the bonus given to workers. It seems that the new system allows the employer to pay the workers outside the current framework; in this system, workers’ implication and motivation are encouraged.
Employers promote variable pay in relation with the profit done on an individual basis, which is an excellent incentive for a worker. However, even if many companies claim that they use a variable pay system, criteria are often arbitrary and set up by the hierarchical superior. From the trade unions’ point of view, it is better to negotiate wages at inter-professional level; they demand a distinction between the indexation and the increase of the purchasing power.
Isabelle Vandenbussche, Institut des Sciences du Travail, Université catholique de Louvain
References
• Belgian Federation of Employers (Fédération des Entreprises de Belgique/Verbond van Belgische Ondernemingen, FEB/VBO). Communiqué de presse: Nouveau système de bonus à partir du 1/1/2008: la FEB tient parole et encadrera les entreprises, available at: http://www.feb.be/index.html?page=111
• Belgian Finance Federation (Fédération belge du secteur financier/Belgische Federatie van de Financiële sector, Febelfin). Interview of Mr. Pierre Wouters, Conseiller Département/social Adviseur Sociaal Departement.
• Belgian Steel Federation (Groupement de la Sidérurgie/Staalindustrie Verbond, GSV). Interview of Mrs. Sophie Rosman.
• Collective agreement (2007, 2nd of July) aiming in introducing a new salary policy in the banking sector (CCT du 2 juillet 2007 viant à introduire une nouvelle politique salariale dans le secteur bancaire/CAO van 2 juli 2007 ter invoering van een nieuw loonbeleid in de banksector).
• Institut des Sciences du Travail (Université catholique de Louvain). Interview of Mr. Gilbert Demez, Professor.
• L’Echo. Le ministre fédéral de l’Economie prône une modération salariale accrue, 10/11/2005.
• La Dernière Heure. Les avantages extralégaux représentent 20% du salaire total, 21/02/2007.
• La Libre Belgique. 40% des Belges ont un salaire variable, 04/07/2006.
• La Libre Belgique. Métal: les négociations sectorielles dans l’impasse, préavis de grève déposé, 29/03/2005.
• Le Soir. Fortis rémunère au mérite, 11/10/2007.
• Le Soir. Votre salaire apprécie les bonus, 8-9/12/2007.
• OECD. Tax reform in Belgium, available at: http://www.oecd.org/LongAbstract/0,3425,fr_33873108_33873261_2510897_1_1_1_37405,00.html