For years, there has been a pressing need to reform Belgium’s stringent labour legislation. The so-called “Super Nota” of Bart De Wever contains several key items that could drive considerable improvements in this field. More specifically, the proposals aim to make the labour market more flexible while guaranteeing social protection and increasing the purchasing power of active employees and those engaged in business activities, all without compromising fiscal fairness.
In the realm of mergers and acquisitions (M&A), the legal landscape is constantly evolving, often influenced by reforms that can significantly impact the business environment. The “Super Nota” outlines a series of proposed labour law and social security reforms in Belgium, which promise to reshape employment regulations and have substantial implications for employers.
For this article, we have identified three topics relevant for companies dealing with M&A, be it on buy or sell-side; (i) modernisation of labour law, (ii) a (new) regulatory framework on company closures and collective dismissals and (iii) wage formation and its impact on salary and remuneration.
Please keep in mind that, as political discussions are ongoing, the proposed measures may be subject to change based on future negotiations.
I. Modernisation of Labour Law
The “Super Nota” proposes several measures aimed at simplifying labour law, adapting it to the evolving needs and preferences of employers and employees, as well as to the challenges and opportunities posed by climate transition and technological advancements.
Key proposals include giving more flexibility to employees and employers to set working hours within the applicable European legal framework, making vacation days transferable, abolishing the ban on Sunday work / night work and working on public holidays, loosening regulations on opening hours and providing for a structural and uniform arrangement for tax- and social security advantageous overtime. Whereas today, during an employment law due diligence, risks are often flagged on non-compliance with working time legislation in Belgium, this reform might ease the compliance burden for target companies and have a positive impact on personnel costs.
It also proposes to simplify the lending of personnel, to introduce flexi-jobs for supporting, logistical, and administrative tasks in sectors that are struggling with large shortages and labour-intensive sectors, and to abolish the federal learning account and the generic rule of five training days. These measures would lighten the administrative burden for employers and make Belgium less complex in terms of labour law regulations. These changes are much welcomed, as a decrease in labour law complexity would make Belgium more attractive for M&A activities.
II. A (new) regulatory framework on company closures and collective dismissals
Also on the agenda is adjusting the regulatory framework on company closures and collective dismissals.
Currently no legal maximum duration exists for collective dismissal procedures. Based on the figures provided by the Federal Public Service Employment, Labour and Social Dialogue, a procedure on average runs for 80 days. During this time, both employers and employees are in a position of uncertainty, as the employer is not allowed to make any final decisions. The proposed reform aims for shorter procedures, providing more clarity in the interest of all parties involved when contemplating pre- or post deal restructuring.
In addition, although no legal obligation, the information and consultation procedures are often only concluded after a social plan has been agreed upon. Whereas social plans today are often focussed on additional severance payments, the reform wishes to ensure that the primary focus of every social plan shifts to employees’ reintegration into new jobs. The proposal is therefore to use a part of the severance pay for training, reorientation, and job placement assistance. In addition, each social plan should also include a training plan. Based on the current texts it remains unclear, though, if these initiatives could have cost impact, be it positive or negative.
III. Wage formation and its impact on salary and remuneration
With percentages reaching up to 11% (January 2023 – joint committee no. 200), the automatic indexation of salaries has been a point of attention during many acquisitions over the last years. The proposed reform upholds the principle of automatic indexation with the aim of protecting wages so that, according to the “Super Nota”s wording, workers can maintain roughly the same standard of living, which provides stability for citizens and the economy alike. The “Super Nota”, however, also proposes to – in case of high inflation (>4%) –, no longer uniformly apply the automatic wage indexation as the same percentage increase for all gross wages, but rather as a net wage increase.
In addition, the “Super Nota” seeks to give employers and employees the autonomy to conclude all-in agreements, with arrangements on wage and working conditions, including additional benefits and flexibility. Through an ‘opt out’ clause, companies can deviate from centrally negotiated wage agreements, provided there is a social agreement at the level of the company.
In Belgium, the social security burden is at ca. 25% for employers and 13.07% for employees (calculated on the gross salary). As a result, both employers and employees are oftentime interested in benefit and remuneration schemes that provide for a more beneficial social security treatment. One popular example is a cafeteria plan whereby an employee sacrifices part of their gross salary and, in return, can choose other benefits as listed in the cafeteria plan, another is paying out the bonus in warrants instead of cash, as warrants can be exempt of social security contributions if granted in accordance with the Stock Option Act of 1999.
The “Super Nota”, however, proposes prohibiting the conversion of part of the gross salary into other remuneration elements by 2025, ending salary sacrifice schemes in cafeteria plans. Stock options and warrants, even under the Stock Option Act of 1999, would become subject to regular social security contributions, except those pertaining to the employer’s own stocks, which would incur a solidarity contribution.
If the short deadlines become reality, the impact on the personnel cost cannot be underestimated. With no view on transitional measures, it will become a key item during an HR due diligence to see how a target company is dealing with these uncertainties and, if they choose to continue these practices, whether they make the necessary provisions to deal with a potential budgetary impact.
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In light of the above, and although the proposals included in the “Super Nota” were intended as a starting point for further negotiations, it is important to stress that it contains several proposals that can directly impact the HR and remuneration strategy of a target company. Thorough HR due diligence will be key in the coming time to make sure that target companies are compliant, or at least have a vision to meet a potential increase of costs.
This contribution was realised by Jessica De Bels, Lisa Vandorpe and Marie Huret – Employment Lawyers at PwC Legal.
