Flemish employment agreement provides training vouchers and tax relief

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In March 2003, the Flemish regional government and social partners concluded an 'employment agreement' for 2003-4. The measures include training vouchers that can be taken up by employees themselves. There is also tax relief for employers, in the form of exemption from the regional property tax. The basis for the agreement was agreed between the employers and trade unions in January 2003, but was then somewhat amended by the Flemish government.

Unemployment in the Flemish region has risen sharply in the last two years. In April 2003, 190,000 people were registered as unemployed with the Flemish Service for Employment and Vocational Training (Vlaamse Dienst voor Arbeidsbemiddeling en Beroepopleiding, VDAB). This represents 7.13% of the workforce, and an increase of 23.4% against April 2001. The Flemish regional government can influence employment only to a limited extent, as general conditions such as the minimum wage and social security contributions are determined by the federal government.

Since 1993, the Flemish social partners have concluded their own regional 'employment agreements' (BE0209303F). These relate to stimulating or adapting the labour market. For example, the agreement for 2001-2 provided for the appointment of sectoral consultants who help companies find people in 'problem' occupations or who encourage companies to recruit more people from disadvantaged groups (immigrants, older people etc). Support for training and increasing the mobility of employees are also part of the agreements' policy options.

Run-up to new agreement

In September 2002, Patrick Dewael, the Minister-President of the Flemish government, asked employers and trade unions to come up with creative proposals for a new employment agreement for 2003-4. However, the Minister-President did not want to attach any budget to the agreement at that time. A leading employers' negotiator, Philippe Muyters, the chief executive of the Flemish Economic Federation (Vlaams Economisch Verbond, VEV) employers’ organisation and chair of the the Flemish Social Economic Council (Sociaal Economische Raad voor Vlaanderen, SERV), stated: 'There was no budget to spend. If there was a good agreement, Patrick Dewael said the money would follow.'

In January 2003, the employers and unions reached agreement regarding training possibilities for employees and tax relief for companies. Mr Dewael said that he was pleasantly surprised by the agreement and that he was delighted by a proposal to scrap the regional property tax. According to the Minister-President, the EUR 140 million proposed for the implementation of the agreement seemed feasible on first sight.

However, the Flemish government then stated that only EUR 100 million (EUR 50 million per year) was available for the agreement. Moreover, it turned out that scrapping the property tax was not possible for 2003. However, the Flemish government promised an arrangement that would fit in seamlessly with the agreement.

It was first decided to give employers compensation for the 'effluent tax' (which is no longer deductible for companies as a result of federal corporation tax reforms). According to Mr Muyters, this was not a good measure. The property tax exemption is a 'linear' measure, while for the effluent tax the situation differs between sectors and companies: in the services sector it is a very small amount, in the textile sector there is already a compensation arrangement, while chemical and food companies treat their own water themselves.

On 21 February 2003, the Flemish government proposed limiting the property tax exemption to materials and equipment (which seems technically possible). In early March, the unions announced their approval of the adjusted agreement. They were finally joined by the employers. The agreement was signed on 21 March 2003.

The agreement

To begin with, the agreement provides for the continuation and updating of the measures in the 2001-2 employment agreement, as follows:

• the use of sectoral consultants to promote a better sector-based functioning of the labour market;

• extension of the Flemish incentive subsidies for career breaks (BE0202305N);

• the combination of training funds into one fund;

• encouraging business transport plans for better travel to and from work; and

• the further development of occupational profiles by the SERV (in order to determine education and training requirements).

The agreement also contains six new measures.

1. Training and coaching vouchers for employees. These vouchers will be purchased by employees, who pay a contribution of 50%, with a maximum voucher value of EUR 250. The vouchers are then used to pay for enrolment on a course or for course material. The course involved must be general training that increases the employability of the employee.

2. Diversity policy: The primary aim of this policy is to achieve greater immigrant participation in the labour market. It also addresses the inclusion of the 'occupationally disabled' (generally, people who have been in special education). Each year, the number of employees of non-EU nationality must increase by between 2,000 and 5,000, to be achieved by encouraging alternating learning and work schemes (for young people between 16 and 18), encouraging language learning, and individual guidance. Sectoral consultants must encourage the participation of immigrants in the labour market. In each sector it must be ensured that immigrants participate proportionately in training. Companies can also set up a 'mentoring' system for new immigrant employees. Trade unions undertake to use diversity consultants to make their officers and activists aware of the proportional participation of immigrants in the labour market. On the employer side, diversity consultants will be used to encourage small and medium-sized enterprises to recruit immigrants. Job consultants will also be used to collect and pass on vacancies for which immigrants can be considered.

3. Starter subsidy. The 'starter subsidy' (starterspremie) will be renewed and simplified. Fewer sectors are excluded and the same support is given to all sectors.

4. Tax relief for companies. The registered income from property will be exempt from the regional property tax as of 2004. There will still be taxes paid to the province and municipality. The tax relief will have to be paid back in the event of a company's relocation.

5. Capital transfer tax relating to inheritances. The capital transfer tax will be simplified and reduced to 2% for transfers of family businesses.

6. Impetus programme for childcare. A minimum of 1,400 additional childcare places will be provided. The regulations on childcare must be made more flexible, in order to allow young parents – in practice, young mothers – to participate in the labour market.

The agreement will be converted into a programme law that will be submitted to the Flemish parliament. This law will also provide compensation for the deductibility of effluent taxes from corporation tax being scrapped by the federal government.

Commentary

The way in which this agreement came about was notable. First, the Flemish government let the employers and trade unions negotiate together. Once an agreement had been reached between them, it turned out to be partially unimplementable for the Flemish government. The Flemish government then 'massaged' the agreement a few times, and was then supported by the unions, after which the employers came around. The programme law to implement the agreement also gives an additional concession to employers. In tripartite negotiations, there is always one party who is left out.

Employment agreements in Belgium never make anything easier. For example, companies are subject to a property tax, then are partially exempt from it, after which the exemption can still be levied. The federal government imposes environment taxes, but they are deductible from corporation tax. Then the federal government scraps the deductibility of them, after which the Flemish government grants compensation for the non-deductibility. (Jan De Schampeleire, VUB-TESA)