New bill aims to increase take-home pay for least-paid workers

Based on joint proposals from the social partners, in September 1999 the Belgian Council of Ministers approved a draft bill aimed at fighting the "employment trap", whereby unemployed people are discouraged from finding work because of the small difference between benefits and the minimum wage. As a result, the lowest-paid workers should receive more take-home pay from January 2000.

The difference between the minimum wage and unemployment benefits can be so slight that unemployed workers are not motivated to accept a low-paid job. In order to avoid such an "employment trap", the social partners, together with the previousDehaene government and the current Verhofstadt administration, have looked into the question of how to increase take-home pay for people earning low pay. At first, during the most recent round of intersectoral negotiations, which led to the conclusion of the 1999-2000 intersectoral agreement in December 1998 (BE9901161F), the social partners had suggested enhancing the value of the minimum wage through tax relief, by granting a monthly tax credit to the targeted group. This solution was endorsed by the National Labour Council (Conseil National du Travail/Nationale Arbeidsraad) and the Central Economic Council (Conseil Central de l'Economie/Centrale Raad voor het Bedrijfsleven). It satisfied both the trade union organisations, which refused further reductions of social security contributions, and the employers, which refused an increase in the minimum wage.

The former and current governments nevertheless preferred a solution involving social security contributions: no tax reduction, but rather an increase in the minimum wage obtained by reducing the social security contributions deducted from employees' pay. This option was not agreeable to the social partners and further negotiations ensued, with a compromise reached in mid-May 1999: a reduction of personal social security contributions, compensated by alternative financing of social security. In early September 1999, the Council of Ministers approved the draft bill presented by the new Minister for Social Affairs, Frank Vandenbroucke, and the new Minister for Employment and Deputy Premier, Laurette Onkelinx. Concretely, as of January 2000, workers with the lowest incomes will receive an additional BEF 1,500 to BEF 2,600 per month, depending on the family's tax situation.

The calculation of the net benefit will have to be made for each worker, each month. The rebate of personal social security contributions may be as high as BEF 2,600 for a gross monthly salary in the BEF 34,000-BEF 42,500 range; it will be progressively reduced all the way down to nil for salaries in the BEF 42,500-BEF 49,000 range. For part-time workers, the rebate will be adjusted proportionally.

The trade unions are happy that this action has been carried through to a successful conclusion. For its part, the Federation of Belgian Enterprises (Fédération des Entreprises de Belgique/Verbond van Belgische Ondernemingen, FEB/VBO) approves the objective of the measure but deplores the government's failure to accept the first proposition put forward in the intersectoral agreement (a monthly tax credit). According to FEB/VBO, the non-fiscal solution adopted entails considerable complications in payroll management. "A government which advocates administrative simplification should have avoided such a solution."