Chris Engels, partner at Claeys & Engels

Employment law needs reform

What in your experience are the key challenges that we face in Belgium from a labour legislation perspective?

“One of the most important challenges that we all face in Europe is our ageing population and the impact that has on the affordability of our social security system and pensions.  The fact is that people have to work longer, but on a political level there seems to be very little room for making this happen. There is plenty of talk, but the real change — adapting legislation and our social security system — is bitterly resisted.  Such efforts are political suicide especially in France, as well as here in Belgium.  

There seems to be a norm or sense of entitlement developing in society that we ought not to work beyond an ‘early retirement’ age of about 58-60 years.  Such attitudes are difficult to change, but at a minimum we should be creating better incentives for working longer.  Essentially we need to create room for a ‘second career’ of sorts, where there is more flexibility and work-life balance.  But that means the right legal context needs to be put in place.  Take the employers’ perspective: if a company hires a person with 40 years experience and after a period of 2 years decides to let that person go (in context of a collective dismissal), then that company is liable for additional ‘bridge pension’ payments for another 5 years.  That is a clear disincentive for hiring older workers.  In fact, the whole body of dismissal legislation in this country is pretty crazy. An attractive legal context is needed for a second career, for both the employee and employer.

Another example with regards to the law is supplementary pensions. According to Belgian law, this must be offered as a collective measure to all employees who belong to the same category at a particular company.  An individual who is already at pensionable age could argue, however, that he or she has no need for that measure, having accumulated enough pension rights across the course of his or her career, and thus would be a more affordable hire for the company.  But it is currently illegal to make such exceptions.  

Changing the law certainly will not be easy, politically or legally.  One potential obstacle to the creation of a specific legal framework for older workers is the EU’s anti-discrimination principle.  While this anti-discrimination principle is admirable and necessary, it isn’t always beneficial to older workers. 

Attracting senior profiles to Belgium

The expense of our social security system also needs to be reviewed.  A key issue for attracting top managers to this country, and maintaining our international competitiveness, is the lack of ceiling on the amount of social security contributions. Meanwhile, there is a definite ceiling on one’s social security benefits.  There was a time when we could offer multinational companies and their staff a more competitive framework via the concept of ‘coordination centres’ but that’s all gone.  U.S. companies constantly ask us about this, but there are few solutions available.  

Long outdated language requirements should be repealed. It rightfully amazes multinational foreign corporations that the employment contract for their CEO in their Zaventem location has to be concluded in Dutch.  Furthermore, the Dutch language version is the only enforceable contract for the company. This doesn’t make sense, and makes Belgium look outdated and narrow minded in times of a globalized economy.

Taking responsibility 

We need not only point the finger at the policy makers; companies also have a responsibility.  For example, the dismissal law in Belgium specifies employees’ rights pertaining to the dismissal payment, which for white collar workers is calculated using the Claeys formula (originally formulated by Thierry Claeys, the co-founder of Claeys & Engels).  Now if one relies on that formula, then dismissal payments can escalate significantly in line with an employee’s tenure at the company.  If you dismiss an employee at the age of 50 who has worked his entire career at your organisation, then you need to pay the equivalent of approximately three years in wages.  In addition, if that person is at bridge-pension age then you will need to pay an extra €500 a month or so until that person reaches the age of 65 (the official retirement age).  But there is way to avoid such penalties, by simply adding a clause in the employment contract - at least for employees with a high starting income.  What surprises me is that few companies actually use this measure systematically.  Similarly, there have been plenty of complaints about the wage indexation system in this country, but when we had recent opportunity to apply a negative indexation, a number of companies did not take advantage of this.  Also, it is important to note that the indexation system is not written into law. On the contrary, it is a component of the collective bargaining agreements between the trade unions and employers’ associations. In other words, there is little point in looking at the government for solutions in this area.  Our social partners should take up their responsibility here. 

Comparing Belgium with the Scandinavian flexicurity model

People often point to the Scandinavian flexicurity model as an alternative for our system but I’m not convinced.  Our model is, in fact, reasonably flexible. In Belgium it is reasonably easy to dismiss someone—it simply costs a lot.  In the Scandinavian model, but also in France, it is far more difficult to fire people. When you are dealing with the Nordics, as soon as you dismiss more than 2 or 3 people, you’ll need to work within a collective dismissal framework with all its implications.  I think the most important difference between our model and the Scandinavians, is cultural.  These are more homogenous, tightly knit societies where the various stakeholders socialize together more and take collective responsibility for national challenges.  Our society is more polarised; we take more radical positions against each other.  That’s why it’s so difficult to talk about these different social security systems in an abstract manner.  I suspect that these systems are more a manifestation of a society’s values and traditions, as opposed to the other way round.