Belgium: Wage formation

  • Observatory: EurWORK
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  • Published on: 30 Март 2009



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Wage bargaining and formation is a key feature of the Belgian industrial relations system. In this national contribution the key dimensions of this system are outlined. Coordinated wage bargaining at sector level with an automatic indexation and wage norm are the basic features of this Belgian system. In the following, additional elements of this system will be introduced (recent trends, minimum wage, gender aspects) while a case study will highlight wage developments in the IT sector.

1. Systems of wage formation

a) Please briefly describe the main systems of wage formation in your country (when relevant please distinguish between private-public sector). For example:

  • is the system underpinned by legislation or collective bargaining, a mixture of both, or other factors, such as the labour market?
  • who are the main actors?
  • do state bodies play a role in wage setting?

General framework

The right to organise and bargain collectively is recognized, protected, and exercised freely. Wage bargaining is highly structured at three interlinked levels: the central cross-sectoral level covering the entire economy; an important intermediate level covering specific industrial sectors; and company-level negotiations as a complement or substitute for the sector-level bargaining. In principle, lower level agreements can only improve (from the employees’ perspective) what has been negotiated at higher level.

At macro level, pay negotiations take place every two years outside the official bipartite organisation and they result in national cross-sector agreements, which cover all companies in the private sector and coordinate the scheduled pay increases for the following two years.

These ‘social programming’ agreements constitute political and moral commitments. Being decided upon the highest level of the industrial relations system, these national cross-sector framework agreements are considered very influential. Therefore, the Visser index on the centralisation of wage bargaining has a very high score for Belgium. The score is also affected by the state-imposed monitoring of the wage systems.

At sector level the collective agreements are concluded within the joint committees or the joint subcommittees by all the organisations that are represented by them. There are about 100 joint committees and 75 joint subcommittees. The sector collective agreement applies to all the employers and employees covered by the joint committees or subcommittees concerned. As negotiations on this level implement the framework of the national cross-sector level, it is argued that the sector is the most important bargaining level.

Although the number of collective agreements concluded at company level has increased, the bargaining system remains centralised. Since the 1989 Preservation of the Country’s Competitiveness Act, the power of central bargaining levels has remained strong, because the margin to bargain on pay increases is defined in the biennial cross-industry bargaining round. And even then, the social partners’ freedom is limited, as the government can always intervene in order to preserve company competitiveness.

Indexation and competitiveness law

Belgium is one of the few countries in Western Europe that still has an extensive automatic index-linking for setting wages. This means that pay and social security benefits are linked to the consumer price index. The link is intended to prevent the erosion of purchasing power by inflation.

In general, and especially for the public sector and welfare provisions, indexing means that for every 2% rise in the cost of living, there is an automatic increase of 2% in pay and social security benefits, the so called exceeding of the spilindex or central index. However, each (sector) collective agreement usually has its own way of implementing the indexing mechanism in setting wages. As a result, indexing has developed into a rather complex system that prevents downward tendencies in real wages.

The state tries to balance this automatic indexing of wages with a tight law on monitoring and intervention in the wage-setting system. The 1989 Competitiveness Law authorises government intervention if the average overall wage increases result (based on past performance) in an upsurge of relative labour costs per head in common currency and in a deteriorating external performance of companies in the private sector.

The 1989 law was extended in 1996 to enable the government to monitor the wage bargaining process even more closely. The most important changes with respect to the 1989 law was a shift from an assessment of labour costs based on past performance to one that predicted future performance, and also in the fact that the number of countries used as a benchmark was reduced to three.

The forecast weighted growth of foreign hourly labour costs in national currency (that is, a weighted average for France, Germany, and the Netherlands) now acts as an upper limit for wage negotiations at all levels (macro, sector, and company). The lower limit remains, as before, the automatic price index of wages, plus wage drift. In practice, the law has mainly worked in a preventive way as a kind of threat.

Public sector

The employment relationship is organised by legislation. Bargaining takes the form of either negotiation or consultation. Negotiation can lead to agreements that are laid down in protocols. These protocols are morally or politically binding for the government, but are not legally binding. The government can act unilaterally. However, the trade union statute states that negotiations and consultations – i.e. the processes itself - are a legal pre-condition for measures to be valid. The trade union statute defines topics where obligatory negotiations or consultation is needed, with pay being one of the topics for negotiation. However, in recent years negotiations have been difficult. General protocols in the committee A are often only reached after long discussions, for example the protocol for the period 2005-2006 has only been signed in the Spring of 2006. The sector also has a system of automatic wage indexation.

b) If collective bargaining is the main determinant, what is the main level at which this takes place (national, sectoral, and/or company level)? Where relevant, please refer to other European Foundation studies that you have written in this context. Where collective bargaining fails, what is the role of labour market institutions (i.e. labour court, labour commission)? Provide an example if relevant.

Extension mechanisms ensure that collective agreements cover almost the whole workforce. The coverage rate is 96% compared to 66% on average in the EU25.

Collective agreements cover all employees of employers who are bound by the agreement, regardless of employees’ membership in the trade union.

The agreements also bind employers, and their workers, who are not members of signatory organisations, but who are covered by the joint committee within which the agreement has been concluded. Employers are legally bound by the agreement unless they have individual employment contracts that include clauses negating the collective agreements. In other words, only employers who are not member of a signatory organisation can deviate from a collective agreement, and only by individual labour contract.

The obligatory nature of an agreement concluded within a bipartite structure can also be extended by royal decree, so that the agreement binds, in an imperative way, all employers (and their employees) who are covered by the bipartite structure within which the agreement has been concluded. This measure ensures that employers cannot escape their obligations under the agreements by including other provisions in individual employment contracts. This procedure, which is initiated upon request by the joint committee or by an organisation represented in this committee, is used quite often.

c) Monitoring. What monitoring of collective bargaining is carried out (if any)? Who carries this out? (Joint /Tripartite body at national/sectoral level)? How does it do this? Are there any studies or surveys?

Monitoring by the Central Economic Council

In 1996, Belgium introduced a law to promote employment and preserve external competitiveness vis-à-vis France, Germany, and the Netherlands, its three major trading partners. Specifically, the law requires that the growth of nominal hourly labour costs for enterprises in a period of two years should not exceed a “wage norm”: a weighted average of the projected increases in labour costs in the three neighbouring countries.

It is set every two years (usually in October) in the IPA by the social partners for a two-year period, based on estimates provided by the official Central Economic Council (CCE/CRB). Specifically, the CCE/CRB estimates the nominal wage norm as the weighted average of the expected increase in nominal labour costs in Germany, France, and the Netherlands, according to projections published by the OECD’s Economic Outlook and corrected for average working hours.

Each year, the CCE/CRB records the evolution of labour costs, as well as all other factors that determine the competitive position of the Belgian economy. The report of November 2007 is a so-called intermediate report; the 2008 report will be the starting point for the next wage bargaining round. The 2007 report has calculated that the wage difference – also referred to as the ‘wage handicap’ by the neighbouring countries France, Germany and the Netherlands – should drop to 1.1% in 2007 and even continue to decrease to 0.4% in the course of 2008.

Index of collectively agreed pay increases

The Ministry of Labour published an index of hourly (blue-collars) and monthly (white-collar) wages rates. Data are based on minimum hourly rates should be paid by employers to wage earners as a result of the collective bargaining process, which in the different sectors of economic activity takes place in the joint committees at sector level. The index calculation takes into account the index-linking mechanism, adjustments for compensating the reductions in working time, and real improvements to wages. Monthly data refers to the end of each month while quarterly and annual data represent averages of monthly figures. The rates apply to wage earners of the private sector (profit and non-profit) and exclude premiums. The public sector is not included.

Currently the Ministry is trying to revise the method of calculation. As part of this project the Ministry is also preparing a web-based database on the collectively agreed wages and working time for each joint committee, which will be open for public consultation.

2. Wage developments

a) Please briefly describe any major overall wage development trends over the past five years (refer to previous EIRO updates where appropriate)

Table Wage development in the Belgian private sector, 1997-2006
Indices of wage increases since the introduction of the wage norm in Belgium, percentage change from previous year
  97-98 99-00 01-02 03-04 05-06 97-06
Gross wages per hour worked 2.8 6.1 7.1 3.7 4.5 24.2
Collectively agreed wages 3.7 4.4 7.1 4.2 5.0 24.4
=> agreed real wage increases 1.0 1.8 2.2 1.4 1.0 7.4
=> automatic indexations 2.7 2.6 4.9 2.8 4.0 17.0
Wage drift* -0.9 1.7 0.0 -0.5 -0.5 -0.2
Labour costs per hour worked 3.9 4.8 8.2 3.6 4.2 24.7
In FR, DE and NL 3.5 5.4 6.7 4.5 3.5 23.6

* Resulting from increases and bonuses granted by firms, as well as from changes in employment structures

Source: CCE/CRB Technical reports

According to the table of wage trends, the wage norm has been largely adhered to. During the period 1997-2006, the accumulated increase in the Belgian labour costs (24.7%) was broadly in line with the accumulated increase by the wage norm (24.4%). However, the labour cost gap with regard to the neighbouring countries has broadened during that period, partly due to a lower productivity growth. As a result, the current wage formation framework of Belgium is under debate (see point f).

To limit the risk of excessive wage increases, a rising number of sectors have included an “all-in” clause into their collective wage agreements, whereby the wage norm was used only as a reference and the ex ante agreed nominal wage increases will be respected ex post, regardless of actual inflation.

b) What developments have there been regarding equal pay between men and women in your country? Is this an issue for debate?

Belgium has a well-developed legislative framework capable of enforcing the principle ‘equal pay for equal work’ and of encouraging the various sectors and companies to take action. The basic rules on which the principle of equal remuneration rests can be found in the constitution: the use of rights and liberties is assigned to all Belgians without discrimination. This principle of non-discrimination was further developed in the Act regarding the equal treatment of men and women in the field of wages, job evaluation and job classifications (7 May 1999). Furthermore, the Royal Decree of 14 July 1987 lays down that companies have to present an annual report on gender equality. The decree also provides for the possibility of developing equal opportunity plans, both at the sectoral and company level. Apart from this a number of European and international standards guarantee equal treatment in matters of wage determination.

In spite of all legal instruments, remuneration differences continue to exist between men and women, with the average difference being 15%. During the last years the remuneration gap has decreased only slightly. The report 2008 of the Ministry of Labour on this issue emphasises the multi-dimensional character of the gender pay gap. The most important conclusions of the report are the following:

  • the segregation on the labour market is the most important factor in the remuneration gap. Almost 60% of the interpretable part of the remuneration gap can be attributed to different job positions of women and men on the labour market;
  • the size of the remuneration gap strongly varies according to the employment statute; *
  • part-time work considerably increases the remuneration gap.

The promotion of better working conditions and equal pay for women has been an important and long-term subject for the trade unions. Also in 2008, the Belgian General Federation of Labour (Fédération Générale du Travail de Belgique/Algemeen Belgisch Vakverbond, FGTB/ABVV) and the Confederation of Christian Trade Unions (Confédération des Syndicats Chrétiens/Algemeen Christelijk Vakverbond, CSC/ACV) have been organising actions on the issue. The most important has been the ‘Equal pay day’ (end of March) with the aim of raising awareness of gender discrimination still persisting in the labour market. The trade unions use this special event as an opportunity to communicate to the public their demands for both equal opportunities and working conditions (BE0803019I).

c) Please briefly describe the main recent sectoral agreements and outcomes in terms of pay

In the autumn of 2008, the new bargaining round for the period 2009-2010 will start. Meanwhile, the last reference point is the sector bargaining round of 2007-2008, which has been finished for most of the sectors in a sector agreement before the autumn of 2007 (BE0711029I).

In almost all sectors, the agreed wage increases remained within the limit of 5%, as prescribed by the inter-sectoral national agreement. Minor deviations from this norm could be detected in the following sectors: quarries (5.5%), metal (5.05%) and petroleum (7.01%). Wage increases will be spread over time and either paid as a percentage (ranging from 0.55% to 0.70% or 1.6%) or as an absolute figure (ranging from €0.05 to €0.20 or €0.65 for hourly wages; or varying between €8 and €25 for monthly wages). A number of sectors, including the steel and food sectors, reserved a ‘wage envelope’ that has to be bargained at company level.

Once again, the inter-sectoral agreement invited the sectors’ social partners to integrate a ‘correction mechanism’ into their two-year agreement - if still lacking in the sectoral agreement. If, as a result of the agreed pay increases and following automatic indexation, the actual pay increase is higher than the agreed pay increase, a bargaining procedure for correction must be provided. Contrary to expectations, only few of the new sectors adopted such an ‘all-in agreement’. This all-in mechanism, as a result, continues to be used predominantly by industrial sectors such as metal, textiles and construction.

Nevertheless, the intermediate report on wage developments for the period 2007–2008 by the Central Economic Council (Conseil Central de l’Economie/Centrale Raad voor het Bedrijfsleven, CCE/CRB) concluded that agreed wage increases could be characterised as ‘moderate’.

d) Are there any noteworthy trends at company level, such as an increasing individualisation of pay setting?

Scientific information on individualisation is scarce. Information from the PASO organisational panel survey, dating from 2003, states that the phenomenon of individual bargaining as main determinant of pay is more frequently used in smaller companies and high skill jobs. The results of the survey, which only cover the Flemish region, show that for approx. 20% of the white-collar workers and 40% of the ‘cadres’ (higher professional and managerial staff) the main instrument of pay determination is individual bargaining. However, from union experiences, we know that these ‘cadres’ very often get at least the same pay increase as the other workers. In other words: the automatic indexation of the sector agreements are also applied to these ‘cadres’ personnel, although managerial executives are strictly speaking not covered by the agreement. No clear information exists, whether this individualisation is a increasing.

e) Recent main actions/strikes /protests on wages

With minor exceptions, the sector negotiations of 2007-2008 went rather smoothly. However, due to rising inflation and price increases, tensions have increased since the winter of 2007-2008. An important starting point for this wave of protests, strikes and increased public debate was a protest demonstration of the three major trade union confederations of the country on 15 December 2007. The Belgian unions also strongly backed the protest event of the ETUC in Ljubljana in spring 2008.

A wave of unofficial strikes took place in Belgium between December 2007 and March 2008. The workers involved were demanding higher wages to offset rising energy and food prices. However, employers have strongly criticised the strikes. For their part, the trade unions supported the workers’ demands, but also tried to ease the situation. Meanwhile, the newly-formed government reacted by announcing new tax redemption measures (be0802049i).

These strikes in the private sector have also been followed by demands for higher pay in the public sector: first in the Flemish administration (be0804019i), currently in the railway company and the local public sector.

f) What are the main social partners’ views on wage developments in your country?

The increased competitiveness gap with regard to neighbouring countries was acknowledged by the intersectoral bargainers during the previous bargaining round. Compensation through tax redemption and an effort of wage moderation have consequently been developed. However, dissatisfaction from the employers’ side and right-wing political parties intensified the debate on the wage formation framework, backed by reports from IMF and OECD, which blame the wage bargaining system as not being flexible enough to accommodate economic shocks and changes in (regional) unemployment. The unions pinpoint to structural changes in the employment population (greying) and the excessive pay rises of top executives as major elements of wage increases in Belgium.

The series of unannounced strikes intensified the political debate and changed the focus to the rise in the cost of living and the loss of purchasing power. This debate is related to the existing system of automatic wage indexation in Belgium and the settlements of prices in certain sectors (especially electricity and gas). Again, international criticism added to the heated debate. Although not specific to Belgium, the President of the European Central Bank (ECB), Jean-Claude Trichet, took a firm position on 11 January 2008 against automatic wage indexation mechanisms related to inflation rates. This position received considerable media attention in Belgium.

3. Minimum wages

In this section, we are aiming to update information from the previous study on the minimum wage (http://www.eurofound.europa.eu/eiro/2005/07/study/index.htm)

a) Does your country have a national minimum wage?

*If yes: b) How is it defined? How is it set and uprated? Do you have any data as to its level and coverage rates?

*Il no: c) Are there minimum wages (sectoral, regional) covering a major part of the workforce?

No major changes with regard to the minimum wage system. Besides automatic indexation, the intersectoral minimum wage has been increased considerably in 2007 and 2008

d) What are the views of the social partners and the government on the minimum wage(s)?

As part of a long-standing tradition in the country, the system of minimum wage is not fundamentally questioned by the social partners. In relation to social exclusion and poverty, the debate is much more focused on the so-called ‘inactivity trap’, i.e. when people have to live on social benefits which might not be sufficient to keep the recipients out of poverty. In recent years, unions have been rallying for a ‘welfare safe’ (welvaartsvast) social security system (BE0610049I). In relation to the minimum wage, the policy debate and subsequent reforms have mainly focused on the so-called ‘unemployment trap’. The unemployment trap occurs when the net income difference between low-paid work and unemployment benefits is less than work related costs, discouraging taking up work. In recent years social partners in dialogue with the government developed measures to avoid the unemployment trap (see point f).

e) Is the minimum wage a subject for debate in your country?

Is there any debate on minimum wage and minimum income? Please indicate the main issues and policy implications that are debated in this respect.

See previous point.

f) Do you have any data on the minimum wage in relation to average wages, how it interacts with the tax system and any effects it is having on employment?

Studies exist on the ‘unemployment trap’ in the country. Based on these studies the Belgian governments (Federal and regional) have developed tax-based measures to ‘make work pay’. Several schemes have been introduced to make work more financially attractive and to make it easier for people to take up paid employment rather than not working. As a result of these tax-based measures, the worker's net income can increase without generating additional costs for the employer. These measures form an important part of the Belgian stability programme 2008-2011. For example: The "work bonus" system, which consists of a sliding-scale reduction in personal social security contributions, is being extended to combat unemployment traps. The minimum wage has been increased twice, besides the automatic indexation, as a result of the inter-sectoral agreement 2007-2008.

4. Wage formation within the IT sector

Please describe in detail the wage formation process in the IT sector in your country.

I] Please give the main features of the sector

a) Importance of the sector in the economy

The Belgian information and communications technology sector is defined by Agoria (the main employers’ organisation focusing on IT industries) as the sum of the following activities:

1) the manufacture of IT hardware and office equipment;

2) the importing, adaptation, delivery and/or installation of IT hardware and office equipment;

3) IT services and related activities.

The sector is considered as a key factor for economic and employment growth. In general, ICT innovations are considered as an important driver of productivity growth in the country.

b) % of the workforce in the sector

Around 100,000 employees are working in the sector, which is around 2.8% of the total employment in the country. Furthermore, many IT workers are employed in other sectors (see on this aspect of professional IT careers, the METIC research results).

c) Main pay-related characteristics, such as: low pay, differences in pay between men and women and/or older and young workers, wage drift;

See point II.b). Nevertheless, specific information on the IT sector is limited, due to the difficulty to define the sector by simple statistical classifications (i.e. NACE 2-digit).

II] Describe the main characteristics of the sector pay decision process

a) Is the wage formation process in this sector shaped by institutions? If there is a collective bargaining process, how does it work? Egg:

  • at sector level only;
  • at sector level, which then provides a framework for company level;
  • at company level only
  • are the main actors?

From the perspective of collective bargaining, the sector does not exist as such in Belgium. The industrial activities are mainly organised within the joint committees of the metal sector (111 for the blue-collars, 209 for the white-collars). The service segment is covered by the supplementary joint committee for white collars, number 2018 (aanvullend paritair comité voor de bedienden). As this committee is operating as a kind of rest category (although currently covering almost 1/3rd of the employees in the private sector), the sector agreements are only laying out a basic framework, which has only a major relevance for the small IT service companies and the lower-ranking jobs in the companies. Nevertheless, the sector agreement introduces traditional ‘collective’ industrial relations tools in the sector of which is the most important the automatic wage indexation.

For the main actors we can still refer to the comparative study of 2001 (BE0104245S).

b) Specific issues : upward pressures on pay such as wage competition between firms, the effects of a tight labour market, and using pay as an attraction and retention tool, the effects of migration on pay, the effects of the presence of multi-national firms within a sector and whether comparisons have been made between the pay offered by multinationals and local companies

Recent, specific academic studies focusing on the wage developments in the IT sector are missing. Nevertheless, different HRM service companies publish on recurrent base information on the wage developments in the sector. The study of SD Worx is one of the most important in this regard. It focuses mainly on the IT service occupations. A look to these recent SD Worx reports on IT wages lead to the following main conclusions:

  • Pay increases in the IT sector/occupations are above average in the sector
  • In recent years these high pay increases have slowed down. Other, mainly financial occupations are having currently higher increases.
  • After a period when wage dispersion between high and low-profile occupations was growing in the sector (2001-2004), this discrepancy is again diminishing. In other words, lower profile IT occupations are catching up the last 2 to 3 years.
  • IT workers, employed outside the sector are earning on average more than IT workers employed in the sector itself
  • Forms of variable pay are more and more used in the sector and offered as a way to attract and retain people.

Due to the labour shortages in the sector migration is an important issue. Now and then, union activities with regard to wage discrimination of these workers are reported in the press. However, no global in-depth study exists on the effects of migration on pay, nor on the differences in pay between multinational and local companies.

III] Analysis on trends and views of the actors

a) Are there any major differences between this sector and the rest of the economy in terms of wage formation?

Looking to the industrial segment, these activities are a part of the traditionally well-organised metal sector. As such, trade unions and pay bargaining is well developed.

Compared to other sectors, the IT service sector has a higher degree of professional and managerial staff. Although basic wage arrangements are settled at sector level in joint committee 218, the wage formation process is much more decentralised for this IT service sector. It means that ‘real’ bargaining is much more limited to the larger companies. Due to the labour market strength of a large group of IT occupations, bargaining is also much more individualised and characterised by extra-legal benefits and wage premiums (variable pay).

b) Are there any noteworthy trends at company level, such as an increasing individualisation of pay setting?

See previous point

c) What are the main views of the social partners in this sector on wage formation?

As already stated the sector is a much diversified sector, with a major part of the employment in the metal sector (cf. more manual, blue-collar labour) and in the business services sector. IT-workers in both sectors are on average in the higher wage segments and as a result, wages are not as problematical as in other sectors. The sector is also confronted with other problems: a lack of skilled personnel is a very important issue from the employers’ side. From the union side, issues like lifelong learning, working time/work load and flexibility (especially in relation to contract types, cf. freelancing or ‘cadres’ statute in the service industries) are important issues. For both partners it is still also a major challenge to disseminate the ‘collective system of industrial relations’ in the sector (especially in the service segment). Increasing membership for both sides is an important objective in this regard.

However, in the industrial sectors the wage discussion is stimulated by delocalisation and the debate on international competitiveness. Agoria is one of the most critical employers’ organisations when it comes to the Belgian wage indexation system. It has introduced in the sector also a so-called all-in clause in the wage agreements (see above).

In the service sectors, the wage debate is more structured towards extra-legal benefits and wage premiums/bonuses.

d) Are there any positions of the authorities on the sector’s wage policy ?

Not directly. However, the government has tried to boost competitiveness and innovation in a range of sectors by the introduction of pay incentives. IT companies and workers are in this regard a key target group. The innovation premium (BE0610019I) and the recent new regulation on bonuses and financial participation (BE0801019I) are parts of this policy.

5 Views of the national centre

Please set out your views on the issues that this questionnaire has dealt with.

Wage bargaining and formation has always been a key point on the agenda of the Belgian social partners. However, recent inflation rates have intensified the debate. Unofficial strikes and campaigns for social elections have resulted in rather firm statements from the union side on this matter. New demands have to be contrasted with the continuous call from the employers’ side and (right-wing) policy makers to lower the labour cost gap of Belgium with other countries, as the current situation constitutes a negative competitiveness factor for the country. The wage setting system is seen as one important factor of the consistent unemployment problem of low-skilled workers. The next wage bargaining round, scheduled for the end of 2008, is therefore expected to be difficult.

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