Service vouchers, Belgium

About

Country: 
Belgium
Sectors: 
Maintenance and cleaning
Target Groups: 
workers/suppliersemployers/purchasers

The system of ‘Local employment agencies’ (Agences locales pour l’emploi/Plaatselijke werkgelegenheidsagentschappen, ALE/PWA) was the first attempt to transfer certain household services into the formal labour market in Belgium. Up to then, many of these services were made available through undeclared work. Through the ALE/PWA, long-term unemployed people can carry out neighbourhood services for private persons, local authorities, non-profit associations or schools for up to 45 hours a month.

Background

The system of ‘Local employment agencies’ (Agences locales pour l’emploi/Plaatselijke werkgelegenheidsagentschappen, ALE/PWA) was the first attempt to transfer certain household services into the formal labour market in Belgium. Up to then, many of these services tended to be made available through undeclared work. Set up in 1994, the ALE/PWA system also aimed to reintegrate long-term unemployed people into the labour market. ALE/PWAs have been established in all Belgian municipalities. Through the ALE/PWA, long-term unemployed people can carry out neighbourhood services for private persons, local authorities, non-profit associations or schools for up to 45 hours a month. They keep their entire unemployment benefit and receive an income supplement of €4.10 per hour worked; this is paid by means of ALE/PWA vouchers obtained by the service users.

This system proved to be largely successful from a quantitative point of view. In terms of quality, the ALE/PWA workers were satisfied with their working times, flexibility and the income supplement. However, it was considered a disadvantage that the scheme leaves those who are unemployed in a state of dependency on social allowances and could lead those benefiting from the highest allowances into an unemployment trap, whereby it is more attractive financially to stay unemployed than to get a job. Nor does the system offer a real employment contract.

On 1 January 2004, the Belgian federal government launched a – still ongoing – system of service vouchers (dienstencheques) in a new attempt to boost job creation by promoting the demand for domestic services and proximity services, and to offer an alternative to the ALE/PWA scheme. Service vouchers allow private persons to hire the services of recognised companies for domestic help. ALE/PWAs still provide certain services such as gardening for private persons or activities that are usually performed by volunteers on behalf of associations or schools.

The main actors involved in the service voucher system include: the federal government; the Service Vouchers Recognition Commission at the National Employment Office (Office National de l’Emploi/Rijksdienst voor Arbeidsvoorziening, ONEm/RVA); ALE/PWAs, where service users can register and where they can buy vouchers; the company Accor TRB, which is in charge of the management of the service voucher scheme; temporary work agencies; recognised voucher companies – commercial, social or public; ‘Category A workers’; and ‘Category B workers’. ‘Category A workers’ with a service voucher employment contract, who also receive unemployment or other benefits, are required to work at least a minimum number of hours in the service voucher system and continue to receive income guarantee benefits as long as they are working part time. ‘Category B workers’ cannot claim unemployment benefits while working in the service voucher system and have the right to work only a limited number of hours a week; they are not obliged to accept more work when this is offered by the employer.

The target groups in this project include unemployed persons, on the one hand, and households looking to outsource work, on the other. To reach these groups, the programme also targets the National Office for Social Security (Office National de Sécurité Sociale/Rijksdienst voor Sociale Zekerheid, ONSS/RSZ) and ONEm/RVA.

Objectives

The service voucher scheme aims to:

  • create new jobs, particularly for low-skilled workers. The target was for 25,000 additional jobs by the end of 2007;
  • provide an incentive to move from undeclared work to a regular job in economic sectors where undeclared work is common;
  • offer certain categories of unemployed persons who perform service jobs for the local employment agency (ALE/PWA workers) the opportunity to move towards a regular employee status;
  • improve the work-life balance of service users by making it easier to outsource domestic work.

Specific measures

The service voucher is essentially a wage cost subsidy for labour-intensive, low-skilled domestic work. All residents in Belgium can buy service vouchers in order to purchase domestic help, ranging from housecleaning, laundry and ironing, to sewing, meal preparation, and transport for less mobile people.

The activities paid with service vouchers are carried out by employees working for a company that is recognised as a service voucher company. The latter can include: commercial businesses, such as temporary work agencies or cleaning companies; companies working in the social sector, such as reintegration services; and public services, such as local welfare offices or communities.

Each voucher costs the user €6.70, which corresponds to one hour of domestic help from a registered company. The cost of the voucher is partially tax-deductible: the service voucher scheme entitles its users to a fixed 30% tax cut, so that the net cost is only €4.69. In addition to the €6.70, the registered company receives a government subsidy of €14.30.

Workers paid with service vouchers have a ‘service vouchers employment contract’. This is a normal employment contract with some specific features. The employment contract may be fixed term or open ended, full time or part time. A worker can serve several successive fixed-term employment contracts with the same employer without this leading to an open-ended employment contract. However, this is only possible for a limited period of time varying between three and six months. The workers have an employment contract, earn a wage corresponding to legal wage scales, accumulate social security rights and are insured against industrial accidents.

The user dates and signs the service voucher(s) and hands one voucher per worked hour over to the worker. Only the vouchers can be used to pay for hours worked. The worker passes the service vouchers on to the recognised company, which in turn sends them to the issuing company in charge of refunding the value of the service voucher to the recognised company. Since 1 September 2006, the ‘paper’ service voucher scheme has been supplemented with an electronic version, giving the user and the recognised company a free choice for one of both schemes.

Evaluation and outcome

Achievement of objectives

Creating new jobs

The aim of creating 25,000 additional jobs by the end of 2007 has largely been achieved, although most jobs are only part time (Peeters and Gevers, 2006a).

  • The service voucher system has created jobs for target groups that do not easily find their way into the labour market. Since the beginning of the scheme in 2004, approximately 12,400 unemployed people have found a job in the system, including a large number of long-term unemployed persons, low-skilled persons, non-active persons and people from different ethnic backgrounds. Some 43% of the participating workers were unemployed before starting in the system.
  • Almost 60% of the service voucher workers have a permanent employment contract and 11% of the workers are employed on a full-time basis. More than half of the workers use the system to get another job, which means that the service voucher system may function as a channel towards regular employment. No data are available, however, to show the extent to which this is actually happening.
  • Exit from the system is limited (only 14%) and stability within the scheme is relatively high: more than 90% of the workers have not switched employer since starting in the service voucher system. Permanent employment contracts are offered more often than fixed-term contracts.

Providing an incentive to move from undeclared work to regular work

At first glance, this objective appears to have been achieved (Peeters and Gevers, 2006a). Some 10% of users admit to having used undeclared workers before registering as a service voucher user. A quarter of the service voucher users concede that they would use undeclared work if the service voucher system did not exist. Only 1% of service voucher workers admit to having worked in the informal economy, but 67% state that working in the service voucher system as a way out of undeclared work is an important motive for participation.

However, questions with respect to illegitimate actions tend to produce socially desirable answers, implying that the real picture may be different. In addition, the service voucher system has not had a significant impact on the undeclared economy in Belgium, which is estimated at between €2 billion and €22 billion. Few workers have moved into regular jobs and the substitution of regular work for undeclared work has been limited (Homburg and Renooy, 2007).

Offering the unemployed the opportunity to move towards regular employee status

During the first year (2004), the change from ALE/PWA s into regular jobs was limited, but it was expected to increase as the original system of service jobs through the ALE/PWA has been closed to new users and workers since 1 March 2004 (Peeters and Gevers, 2006a).

Improving the work–life balance of service users

Demand continues to grow for the service as is borne out by the continuous increase in the number of registered users (Peeters and Gevers, 2006a). It may be assumed therefore that the service users are pleased with the opportunity to ease some of their workload and improve their work–life balance. However, certain problems arise in the system, such as a significant time delay in the initial service delivery (see below).

Meanwhile, the service voucher workers also view the system positively in terms of improving the work aspect of their work–life balance: 85% are satisfied or very satisfied with their work in the system and 87% of the workers are satisfied or very satisfied with the content of their work. The work schedule (working hours), number of hours worked and type of employment contract are all evaluated positively. Overall, two thirds of the employees in the service voucher system are satisfied or very satisfied with their pay level. Moreover, 57% of workers judge the training opportunities positively.

Obstacles and problems

Insufficient supply of workers

Some 58% of service voucher companies complain about an insufficient supply of adequate candidate workers. Temporary work agencies seem to have the largest problems in this regard: more than 86% experience difficulties in finding service voucher workers. ALE/PWAs, communities and local welfare offices experience the fewest difficulties in finding adequate workers, with less than half reporting difficulties with respect to supply. According to the service voucher companies, the most likely possible causes for the labour shortage were a lack of work motivation among potential workers (cited by 84% of the companies), the limited mobility of candidate workers (reported by 75% of the companies) and a lack of required skills (Peeters and Gevers, 2006a).

Time lag between contacting a company and service delivery

On average, a user has to wait 28 days before a worker has been found to deliver the service (Peeters and Gevers, 2006a).

Inadequate exchange value of service voucher

The service voucher companies receive a government subsidy of €14.30 on top of the €6.70 paid by the user for every voucher. However, 62% of service voucher companies argue that a total exchange value of €21 is inadequate to cover all costs (Peeters and Gevers, 2006a).

  • The exchange value is insufficient to provide the necessary training and guidance for the service voucher workers.
  • Tax deductions are finite. Once the service voucher workers no longer meet the relevant legal conditions, the wage costs are borne entirely by the service voucher company, making the exchange value of €21 inadequate.
  • The costs of administration and planning are high.
  • A financial risk arises if a worker cannot deliver a service due to cancellation by the user.
  • Additional costs – such as work clothes, lunch vouchers and transport costs – are not covered by the exchange value.
  • The exchange value does not take into account wage indexation or seniority.
  • Some sectors are bound by higher wages and benefits than others.
  • Some service voucher companies that offer ironing services or common transport services for less mobile people refer to high infrastructural costs.

These complaints suggest that the service voucher system has not managed to achieve a market-led solution.

Lack of training opportunities for service voucher workers

A survey among workers showed that only 16% received training immediately before or during their service voucher employment. A total of 21% of service voucher workers report having been coached during their employment. The lack of training opportunities for the workers seems most striking in the temporary work agencies, where only 2% of workers are offered training (Peeters and Gevers, 2006a).

Lessons learnt

It is expensive to create a viable market for personal services, using wage cost subsidies as an instrument for the supply of labour.

Impact indicators

The following impact indicators have been drawn from Peeters and Gevers, 2006a.

On 31 December 2005, some 28,933 workers were involved in the system, representing 17,360 full-time equivalent (FTE) workers. Just 1.3% of these workers were men, more than 8% of the workers were older than 50 years, about 33% were single income earners, 67% were low-skilled, 42% worked through temporary work agencies, and 43% were unemployed on average for 3.8 years. On 31 December 2006, the number of workers involved in the scheme had risen to 41,598 persons, an increase of 44%.

The following table presents data on the development of the system of service vouchers since 2004. These data show the rapid increase in the number of users and vouchers.

Growth in use of service voucher system, 2004–2006
  2004 2005 2006
Number of registered users

120,247

251,182

420,007

Number of recognised companies (of which active)

785 (504)

1,083 (794)

1,479 (1,162)

Number of vouchers purchased and used

5,619,745

17,215,123

32,186,234

Source: Peeters and Gevers, 2006a

Further impact indicators highlighted by Peeters and Gevers include the following:

  • In 2005, the service voucher system cost €303.2 million in subsidies, administration and tax deductions, €34.7 million of which was to be paid in 2007.
  • For 2006, the gross costs of the service voucher system were estimated at €507.8 million. This was offset by a reduction in benefits (€95 million), additional social security contributions (€77 million) and additional personal income tax revenue (€27.7 million). Consequently, the net costs amounted to €308.1 million.
  • In 2005, the net costs per FTE job created amounted to almost €17,000, which is slightly higher than the Belgian minimum wage (€16,250).
  • Some 12% of the workers in the service voucher scheme transferred into regular employment in 2004, and this proportion declined to 3.4% in 2005.
  • In 2005, the state saved or collected an extra €93.1 million: €42 million was saved as a result of lower unemployment benefits due to job creation, €40.6 million was collected in additional social security contributions and €10.5 million was collected in additional personal income tax revenues. In 2006, as noted above, the reduction in unemployment benefits amounted to €95 million, while additional social security contributions reached €77 million and extra personal income tax revenue stood at €27.7 million.
  • The benefits for society at large of converting undeclared work into regular work have not been quantified.

Transferability

The service voucher approach generated considerable interest among the Peer Review countries in the Mutual Learning Programme of the European Employment Strategy 2007. They generally considered it as an effective, if comparatively expensive, method of addressing the needs of vulnerable groups in the labour market. Some peer countries had already implemented similar schemes, although with a wider coverage of economic sectors and occupations, and less generous in terms of subsidy.

Some countries saw a major potential benefit in helping to bring some of those currently in the informal or undeclared economy into the regular labour market. Other countries questioned the high level of subsidy in the scheme, raised doubts about value for money, and highlighted the potentially market-distorting effects of the fixed-price model incorporated in the service voucher scheme as well as the possible negative impacts through displacement and crowding-out.

The relatively narrow focus on domestic services and the dominance of women among beneficiaries of the programme led to suggestions for a broader approach. It was argued that the inclusion of childcare as an eligible service would also increase the benefits of the scheme from the perspective of women wishing to enter the labour market.

Many countries saw scope for transferability of some variant of the scheme, although in some EU Member States the potential for transferability would be limited by factors such as budget constraints and different levels of development of the domestic service market: some countries have little or no tradition of domestic services being conducted for payment by people outside the family.

Contacts

Main organisation responsible: Federal Public Service Employment, Labour and Social Dialogue (Service public fédéral Emploi, Travail et Concertation sociale/Federale Overheidsdienst Werkgelegenheid, Arbeid en Sociaal Overleg)

Website: www.dienstencheques.be

Bibliography

Federal Public Service Employment, Labour and Social Dialogue, The service voucher in Belgium, Peer Review, 26–27 October 2006, Brussels, IDEA Consult, 2006.

Homburg, G. and Renooy, P., ‘Witte werksters en dienstencheques’ [White cleaning ladies and service vouchers], Economisch Statistische Berichten 92, June 2007, pp. 375–377.

Mutual Learning Programme of the European Employment Strategy, The service voucher, available online at: http://www.mutual-learning-employment.net/Theservicevoucher

Peeters, A. and Gevers, A., The service voucher in Belgium: Discussion paper, Peer Review, 26–27 October 2006, Brussels, IDEA Consult, 2006a.

Peeters, A, Gevers, A. and Sanders, D., Evaluatie van het stelsel van de dienstencheques voor buurtdiensten en -banen 2005 en 2006 [Evaluation of the system of service vouchers for neighbourhood services and jobs], Brussels, IDEA Consult, 2006b.

Edwin Horlings

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