New government plans sweeping reforms

After the longest political crisis in history, Belgium finally has a new federal government led by the Walloon socialist Elio Di Rupo. Pressured by the economic crisis, the demands of the European Union and a strong centre-right Flemish nationalist opposition, the government has embarked on an ambitious list of reforms in employment and social affairs. The pension reforms it has proposed are the most important and have already prompted union disputes across the country.

Background

Belgium's new cabinet was sworn in on 6 December 2011, ending a national political stalemate that lasted 541 days. Elio Di Rupo, from a family of Italian immigrants, became Belgium’s first French-speaking prime minister since 1974 and he is also the EU's first openly gay government leader.

Six parties form the coalition government, representing three political families:

  • Socialists, represented by the Belgian Socialist Party (PSB)
  • Christian Democrats, represented by the Christian Democratic and Flemish Party (CD&V)
  • and Liberals, represented by the Francophone Reformist Movement (MR)

Socialists now head the Ministries of Social Affairs (Laurette Onkelinx, Walloon socialists) and Employment (Monica De Coninck, Flemish socialists).

Di Rupo's government does not include Belgium's most popular party, the Flemish nationalist New Flemish Alliance (NVA), which took the highest number of votes in Flanders during the elections in June 2010. As a result, the government does not have a majority among the country’s elected Flemish MPs.

Quick decisions

The new government quickly agreed on important constitutional reforms, which include devolving responsibilitites to the regions. It has also approved a three-year budget that will cut spending by €11.3 billion, bringing the country's deficit to below 3% by next year, and balance the budget by 2015.

The 180-page long government agreement (in Flemish, 1.81Mb PDF) also includes a long list of plans to reform important areas of labour law and social regulation.

This update summarises these planned reforms which cover pensions, career leave, employment policies, the fight against social fraud and devolution to the regions.

Pension reforms

Bridge pension

The term ‘bridge pension’ (brugpensioen), which applies to an early retirement benefit, will disappear. This benefit will now be described as ‘unemployment with an extra company benefit’, indicating that the worker still has to be available for work.

This form of early retirement will only be available from the age of 60 and after a career of 40 years.

To enforce this rule, new collective agreements will be needed because some existing or renewed collective agreements could keep the former regime in force until January 2015.

Collective dismissal

In the case of collective dismissal, the rules relating to bridge pensions are also changing. Currently those aged 50 and over can take the option of a bridge pension in settlements at companies in financial difficulties, but this minimum age is being raised to 52 and will be gradually increased by six months each year to 55 years by 2018.

Restructuring companies will have to set a minimum retirement age of 55 in 2013.

When a collective dismissal includes 20% of all employees, the restructuring will be subject to the same rules as for a company defined as ‘in difficulties’.

The employers’ contribution to a bridge pension will be adapted according to the age of the ‘retiring’ person.

The system of part-time bridge pensions will be abolished, and no new entrants to this scheme will be accepted from 2012 onwards.

The government also foresees the possibility of increasing the age requirement for the bridge pension to 62 years in 2020 (when the current measures are likely to have become insufficiently effective).

Early retirement

The minimum age for early retirement will rise gradually from 60 to 62 years. From January 2013, it will increase by six months every year until it reaches 62 in 2016.

Currently an individual must have worked at least 35 years to qualify for early retirement. This will rise to 40 years by 2015. For longer careers of more than 40 years exceptions are foreseen.

Earning income after retirement

From 2013 people who are older than 65 and have worked for more than 42 years will be allowed to work and earn as much as they want after retirement without losing any state pension rights.

For others, the rules have also been slightly relaxed and the amount they can earn without being taxed has been raised. However, it is still not possible to acquire extra pension rights by working after retirement age.

Adaptation of the second and third pension pillar

Tax benefits have been withdrawn for contributions made to the pension system’s so-called second and third pillars, occupational pensions and individual pension arrangements.

Contributions to occupational pensions will only be fiscally beneficial if they contribute to acquire an extra pension that is together with the legal first pension not higher than the highest pension for civil servants.

Taxation of payments in the form of a capital refunding at the start of the retirement period (in stead of an extra monthly benefit) will be increased: 20% when refunded at 60 years, 18% at the age of 61, 16.5 at the age of 62 to 64; and 10% at the age of 65.

Reforms of the unemployment benefit system

The new government also wants to increase employment by 5%.

To help do this, it will considerably tighten the requirements for unemployment benefit, limiting the payment of this benefit up to three years and making it digressive, meaning the longer someone is unemployed, the smaller the payment will become. The proposed reduction in payments will not however apply to unemployed workers who have worked for more than 20 years, the temporarily unemployed and single people over the age of 55.

School leavers will now face tougher restrictions on benefits. The unpaid transition period between losing a job or leaving school and receiving benefits will be extended from nine months to one year. The name of the benefit they then receive is to be changed from ‘waiting benefit’ (wachtuitkering) to ‘job introduction benefit’ (beroepsinschakelingsuitkering).

This benefit is payable for a maximum of three years and recipients will be monitored to check they are making an effort to find work. This maximum term can be extended if the claimant has worked for more than 156 days in the two years before unemployment. Those over the age of 33 can no longer receive this ‘job introduction benefit’.

The minimal distance rule for accepting a job offer from the state employment agency is increased from 25 to 60 kilometres. If unemployed workers choose not to accept a job offer, they can lose their unemployment benefit.

For the first three new employees, employers will be given higher social tax exemptions from 2013. Other social tax exemption measures are also extended to employers that hire someone who is in receipt of a ‘bridge pension’.

Enterprises will have to pay more attention to older workers. In the case of collective dismissals, the age pyramid of the workface will have to be respected. Every company will have to develop an employment plan for older workers, taking into consideration the size and activity of the company.

When a full-time position becomes available, a request from a part-time worker already in the company to fill this vacancy will have to be acknowledged.

Reform and modernisation of regulations covering issues such as temporary employment, part-time work, overtime and telework are also envisaged.

Radical reform of career breaks and leave rules

The right of employees to take a career break, known as time credits, was introduced in Belgium in 2002. The Di Rupo government’s reforms state that all applications for time credit from 20 November 2011 will have to be granted in accordance with the following new rules.

  • The normal time-credit or career leave will be limited to a maximum of one year for full-time workers, two years for part-timers, or five years for those working one fifth of a usual working week.
  • The qualifiying criteria are to be restricted. An applicant must have already worked for more than five years, and at least two years in the company concerned. These restrictions can no longer be overruled or extended by collective agreements.
  • The time-credit system with justification (to care for a young child or sick family member) can be used for a maximum of 36 months during a worker’s career, whether they work full or part time.
  • The time credit system for older workers with higher benefits, currently for those over the age of 50, is now restricted to people over 55 who have worked for 25 years. Exceptions will be developed for so-called ‘heavy’ occupations.

These time credit periods were previously included as working time for the calculation of pensions. This ‘equalisation’ will now be severely limited to a maximum of one year (previously three years in most cases).

The career leave system in the public sector will be harmonised with the new time credit system and this harmonisation will have to be completed by 2020. From 2012 onwards, the career leave system in the public sector will be limited to a maximum of 60 months.

Parental leave

The European Directive on Parental Leave, allowing a minimum of four months, will be implemented in Belgian labour law.

Individual career account

A method of integrating the current systems of career leave into a system of one individual career account will be examined.

Company cars

In recent years company cars that can also be used for private purposes have been a popular way to grant professional and managerial staff an extra wage benefit that has tax advantages for both employer and employee.

Belgian legislators have attempted to cut back on these advantages, and current tax legislation uses a formula to calculate the value of the private use of a company car and levy tax accordingly. This formula will now be changed.

Instead of being based on the number of kilometres the car was used for privately and the CO2 emissions of the vehicle, this tax will now be calculated on the purchase price of the car and the CO2 emissions. As a result, bigger and more luxurious cars will be more costly for both employees and employers.

Fight against social fraud

Among other scheduled measures, the government will tackle bogus self-employment and illegal work. New regulations will start from the premise that one is working as an employee when certain conditions are fulfilled. In a range of sectors, known for their susceptibility to fraud, new registration systems will be introduced to tackle illegal work.

Devolution to regions

As part of the planned state reform, a range of employment measures will be shifted from the federal to the regional level, including:

  • paid educational leave;
  • the service voucher system (an attempt to boost job creation by promoting the demand for domestic services);
  • industrial apprenticeships;
  • social tax deductions for specific at-risk groups;
  • social economy programmes.

An important part of this devolution is the transfer of control of unemployed workers from the federal unemployment fund to regional employment agencies. However, it is also confirmed that all labour law will continue to be decided at a national level.

Other issues

Other reforms include:

  • an increase in the number of training hours that will be covered by paid leave;
  • harmonisation of the employment statutes of white collar and blue collar workers, scheduled to take place before July 2013;
  • a new plan will focus on the health and safety of temporary workers;
  • more effort will be made to increase the low declaration rate of accidents at work;
  • the labour system in harbours, which is still a kind of closed-shop, will be revised.

Commentary

This is a long list of scheduled reforms for a Government that has only two years left to govern before the next national elections are scheduled to take place.

Guy Van Gyes, HIVA-K.U.Leuven

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